Passage Based Questions: Comparative Development Experiences of India and its Neighbours | Economics Class 12 - Commerce PDF Download

Passage - 1

Direction: Read the following news article and answer the question that follows:

SINO-PAK FRIENDSHIP CORRIDOR

The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two nations. However, it has also sparked criticism for burdening Pakistan with substantial debt and allowing China to use its debt-trap diplomacy to gain access to Pakistan's strategic assets. The foundations of CPEC, part of China’s Belt and Road Initiative, were laid in May 2013. At that time, Pakistan was struggling with weak economic growth. China committed to playing an integral role in supporting Pakistan’s economy.

Pakistan and China have a strategic relationship that spans decades. Pakistan turned to China when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC’s early projects met this need, leading to a dramatic increase in Pakistan’s power generation capacity, which brought an end to supply-side constraints that had caused rolling blackouts across the country.

Pakistan embraced CPEC, leveraging Chinese financing and technical assistance to end power shortages that had paralyzed its economy. Years later, China's influence in Pakistan has increased at an unprecedented pace.

China as Pakistan’s Largest Bilateral Creditor:
China’s ability to exert influence on Pakistan’s economy has grown substantially in recent years, mainly due to Beijing now being Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, Pakistan’s total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, with only 9.3 percent owed to China. By April 2021, this external debt had surged to $90.12 billion, with Pakistan owing 27.4 percent—$24.7 billion—of its total external debt to China, according to the International Monetary Fund (IMF).

Additionally, China provided financial and technical expertise to help Pakistan build its road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from Karachi to Gilgit-Baltistan (POK). These investments were crucial in better integrating the country’s ports, especially Karachi, with urban centers in Punjab and Khyber Pakhtunkhwa provinces.

Despite power imbalances between China and Pakistan, the latter still retains significant agency in determining its policies, even if such policies come at the expense of the long-term socioeconomic welfare of Pakistani citizens.

Answer the following questions:

Q1: What are two economic benefits of the China-Pakistan Economic Corridor (CPEC) for Pakistan's economy?
Ans: Economic advantages of the China-Pakistan Economic Corridor (CPEC) for Pakistan’s economy include:
(i) China provided financial and technical expertise to help Pakistan build its road infrastructure, supporting employment and income in the economy.
(ii) CPEC has led to a significant increase in Pakistan's power generation capacity, which has eliminated supply-side constraints that previously caused frequent blackouts across the country.

Q2: How does Pakistan's bilateral 'debt-trap' situation with China affect the Pakistani and Chinese economies?
Ans: China has become known for its ‘Debt Trap Diplomacy’ in recent years. Through this strategy, China provides financial and technical assistance to various nations, bringing them under its direct or indirect influence. The primary implication of this diplomacy is that Beijing has now become Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, Pakistan's total public external debt stood at $44.35 billion in June 2013, with only 9.3 percent owed to China. By April 2021, this external debt had increased to $90.12 billion, with Pakistan owing 27.4 percent—$24.7 billion—of its total external debt to China, according to the IMF.