CPEC - China Pakistan Economic Corridor News & Discussion

RoaringTigerHiddenDragon

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Just checked the progress on CPEC power projects, looks like all of them(coal, wind & solar) are completed and operational.
hah the classic catch...build power plants with the required generation capacity, and it will be 100% electricity everywhere. Wrong though. Arranging for reliable reliable transmission and distribution infrastructure is the key here. Porki's T&D infrastructure is heavily broken and new transmission lines being built are slow and unaffordable. Looks like CPEC does not cover any T&D projects. With mounting circular debt, there is zero chance that the distribution companies will receive any moneys from the users for current power consumed let alone any new power produced.
Plus security issues. Pakshitstan's friendly terrorists take out all sorts of infrastructure and they will take out T&D infrastructure as well. Without social harmony and settlement of genuine grievances, they cannot achieve any quality distribution infrastructure - be it electricity, gas, roads, railways etc. And without quality distribution infrastructure, no amount of capacity building will help. In these shaky conditions, Pakis have guaranteed high Return on Equity for these power projects.
Frankly, time will tell if CPEC projects are viable. But if they pull it off, good for them.
we just better make sure our economy levels are much much larger and more sophisticated like the Chinese one.
 

geoBR

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China slowly retreating from Pakistan’s Belt and Road

Beijing is backing away from its initial $60 billion commitment to the China-Pakistan Economic Corridor project

By FM SHAKIL - DECEMBER 26, 2020

https://asiatimes.com/2020/12/china-slowly-retreating-from-pakistans-belt-and-road/



PESHAWAR – Pakistan’s army is set to take near-total control of the Beijing-financed China-Pakistan Economic Corridor (CPEC), a US$60 billion infrastructure building plan replete with railways, roads, ports and special economic zones (SEZs) that is key to China’s global Belt and Road Initiative (BRI).

A bill in Pakistan’s parliament will give the powerful military a firmer hold over the initiative and its related multi-billion dollar contracts, a martial move some see as aimed at reassuring Beijing that their investments will be more secure amid militant attacks on Chinese engineers and others facilitating the infrastructure projects.

The move comes amid rising indications China is backing away from its initial financial promises to Pakistan under the ambitious scheme.

Recent media reports, citing data compiled by Boston University researchers in the United States, note that overall lending by the state-backed China Development Bank and the Export-Import Bank of China declined from a peak of $75 billion in 2016 to just $4 billion last year. Provisional 2020 figures show that amount shrunk to around $3 billion in 2020.

The belt-tightening is believed to be in line with Beijing’s so-called “rethink strategy” for its US$1 trillion BRI, which is under broad fire for “structural weaknesses” including opacity, corruption, overlending to poor countries resulting in “debt traps” and adverse social and environmental impacts, the Boston University research said.

Initiated in 2013, the BRI is Chinese leader Xi Jinping’s grand plan to connect Asia with Africa and Europe via land and maritime trade networks and, perhaps most importantly, create new routes for China’s strategically vulnerable fuel imports shipped by sea mostly from the Middle East.

The CPEC is critical to Beijing’s latter strategic aim of providing an alternative overland route for China’s fuel shipments through Pakistan that bypasses the congested Malacca Strait, which security analysts predict the US could readily block to strangle China’s economy in any conflict scenario.



It is yet to be seen how diminished Chinese lending will impact the CPEC, however several important related projects are now stalled or are running behind schedule due to a lack of financing. Of 122 announced CPEC projects, only 32 have been completed as of the third quarter of this fiscal year.

Some experts believe that Beijing’s trade war with the US is one factor behind the shift in China’s global lending strategy and apparent retreat from the giant infrastructure initiative in Pakistan.

Others believe documented corruption by Chinese companies involved in the CPEC, particularly in the power sector, has impelled Chinese financial authorities to cut down their lending exposure to Pakistan.

A recent inquiry conducted by the Security and Exchange Commission of Pakistan found irregularities worth over $1.8 billion in the power sector, with 16 mostly Chinese firms involved in the CPEC receiving undue subsidies and causing huge financial losses to the national exchequer.

Militants in Balochistan province, meanwhile, have intensified their attacks on CPEC projects and Chinese nationals working on them, raising the security costs and political risks of the projects. Islamabad’s move to give the military more control over the scheme is a clear attempt to mollify China’s rising security concerns.

A high-placed source in Pakistan’s Planning Ministry told Asia Times on condition of anonymity that Beijing has principally agreed to allow Pakistan to form a new joint venture mechanism with companies other than Chinese state-owned or private enterprises to stimulate CPEC project progress including on a multi-billion dollar railway upgrade.

“We certainly need foreign investors to pump in funds for the mega CPEC projects including $6.2 billion worth of Rehabilitation & Up-gradation of Karachi-Lahore Peshawar Railway Track (ML-1) and half a dozen special economic zones in the width and breadth of the country,” the source said.

The much-touted 1,872-kilometer long ML-1 project is moving at a snail’s pace due to China’s reluctance to fund the project at a paltry 1% return on investment. China is also reportedly unhappy with the government’s decision to trim the project’s cost from $8.2 billion to $6.2 billion due to its rising debt load.

The slow execution of top-line CPEC projects, caused largely by China’s lack of financing, figured high in a meeting held last month between newly appointed Chinese Ambassador Nong Rong and Pakistan’s Foreign Minister Shah Mehmood Qureshi in Islamabad, sources say.

During the meeting, Qureshi stressed the economic need for prompt completion of CPEC projects at a time the Pakistan economy staggers under the pandemic. In particular, he underlined the slow progress on the railway and at Gwadar port, where China is constructing an international airport, building an LNG facility and upgrading facilities to dock larger vessels.

Pakistan appears to be at least partially shortchanged by China. Last month, Pakistan Railways (PR) globally advertised for tender openings to modernize its rail system, including through the procurement of 230 high-speed passenger coaches and 820 freight vans. China had earlier vowed to carry out the work under the CPEC’s ML-1 project.

A Pakistan Railway spokesperson revealed that initially 46 modern passenger coaches would be procured through international bidding. In the second leg, he said, 184 coaches will be built at the Carriage Factory Islamabad. Observers note Pakistan would not need to open the procurement to international bidding if China were interested in the contracts.

Last week, Federal Railway Minister Sheikh Rasheed Ahmed, who has now assumed the charge of interior ministry met Egyptian Ambassador Tarek Dahroug to discuss the possibility of a joint venture to tap the investment opportunities available in the railway’s ML-1 project.

Rasheed said Pakistan would welcome Egyptian investment and urged the Egyptian envoy to nudge their private companies to invest in the railway project, including in the bidding for the procurement of passenger and freight wagons.

If China stands by its original CPEC commitments, it would build and finance at least eight SEZs in all four Pakistan provinces as well as in the Islamabad Federal Territory, the Port Qasam Federal Area, and Pakistan-administrated Kashmir and Gilgit-Baltistan, which Pakistan recently declared as a province. Another SEZ will be built at Gwadar.

Barring the Gwadar zone, the Allama Iqbal Industrial City in Punjab, and Rashakai Economic Zone in Khyber Pakhtunkhwa province, the other seven SEZs are either still in pre-feasibility or post-feasibility stages with no tangible development on the ground.

Both China and Pakistan both are reportedly on the lookout for prospective foreign investors to speed up the work on the SEZs. Earlier, China was reluctant to invite non-Chinese companies to invest in the SEZs but the situation has changed with the dried up financing.

Last month, China’s ambassador to Pakistan reportedly told officials that Beijing was not averse to outside foreign direct investment (FDI) in the “second phase of development” of the SEZs. He made the remarks while meeting Board of Investment (BOI) Chairman Atif Bokhari to discuss “industrial cooperation under the CPEC”, according to reports.

The CPEC’s future is not only clouded by China’s apparent new, more conservative lending policy but also Pakistan’s overborrowing, which is fast driving the country toward a debt crisis. Pakistan’s debt to GDP ratio is now at a high 107% of GDP. Some suggest a higher debt profile, including outlays owed for CPEC projects, could trigger national security concerns.

The Institute of Policy Reforms (IPR), a Lahore-based think-tank run by Pakistan Tehreek-e-Insaf’s (PTI) senior leader Hamayun Akhtar Khan, claimed in a recent report, “Pakistan has slipped into a debt trap due to the government’s failure to bring reforms and weak fiscal management.”

In the research report titled “Pakistan’s debt and debt servicing is the cause of concern,” the IPR summed up that “We are in a debt trap that is entirely our own making. It is a risk to our national security. The government was borrowing to repay the maturing debt, which now seems to be a concern for all the political parties, businessmen and experts.”

Whether Pakistan’s move to give the military near-total control over the CPEC will reassure China that their investments are more secure. What is clear is that Beijing is backing away from Pakistan’s $60 billion plank in the BRI, for reasons that until now are not altogether clear.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.
 

geoBR

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China Backing Away From Promises To Pak Under Economic Corridor: Report

https://www.ndtv.com/world-news/chi...to-pak-under-economic-corridor-report-2343346

According to Asia Times, Pakistan Army is set to take near-total control of the CPEC in a bid to reassure Beijing that their investments will be more secure amid militant attacks on Chinese engineers and others facilitating the infrastructure projects.



Islamabad:
China appears to be backing away from its initial financial promises to Pakistan under Beijing-financed China-Pakistan Economic Corridor (CPEC), a US$60 billion infrastructure building plan, amid rising corruption and terrorist attacks on Chinese engineers.

According to Asia Times, Pakistan Army is set to take near-total control of the CPEC in a bid to reassure Beijing that their investments will be more secure amid terrorist attacks on Chinese engineers and others facilitating the infrastructure projects.

The new bill comes at a time when reports suggest that China is slowly retreating from its promises.

Overall lending by the state-backed China Development Bank and the Export-Import Bank of China declined from a peak of USD 75 billion in 2016 to just $4 billion last year. Provisional 2020 figures show that amount shrunk to around $3 billion in 2020, according to data of Boston University researchers in the United States.

The belt-tightening is believed to be in line with Beijing's so-called "rethink strategy" for its US$1 trillion BRI, which is under broad fire for "structural weaknesses" including opacity, corruption, overlending to poor countries resulting in "debt traps" and adverse social and environmental impacts, the Boston University researchers said.

Pakistan Prime Minister Imran Khan, whose government is criticised for being under military control, is also facing flak in his country for not prioritising and expediting big-ticket Chinese infrastructure investments, Asia Times reported.

In 2018, Imran Khan had put on hold several CPEC projects suspecting corruption by the previous government. However, two years later, several of his Cabinet members were named in big corruption scandals involving the country's power sector. About one-third of Pakistan's power companies are involved in Chinese projects under the CPEC.

The 278-page inquiry report, compiled by the Securities and Exchange Commission of Pakistan (SECP) and presented to Imran Khan in April, unearthed alleged irregularities worth over USD 1.8 billion in subsidies given to 16 independent power producers (IPPs) including those belonging to Imran Khan's advisors Razak Dawood and Nadeem Baber, Asia Times said.

The SCEP had also investigated the profits earned by the Chinese power companies. The report revealed that Huang Shandong Ruyi Pakistan Ltd (HSR) and Port Qasim Electric Power Co Ltd (PQEPCL) were together overpaid by 483.6 billion rupees (USD 3 billion).

Terrorists in Balochistan province, meanwhile, have intensified their attacks on CPEC projects and Chinese nationals working on them, raising the security costs and political risks of the projects. Islamabad's move to give the military more control over the scheme is a clear attempt to mollify China's rising security concerns.

A high-placed source in Pakistan's Planning Ministry told Asia Times on condition of anonymity that Beijing has principally agreed to allow Pakistan to form a new joint venture mechanism with companies other than Chinese state-owned or private enterprises to stimulate CPEC project progress including on a multi-billion dollar railway upgrade.

"We certainly need foreign investors to pump in funds for the mega CPEC projects including $6.2 billion worth of Rehabilitation & Up-gradation of Karachi-Lahore Peshawar Railway Track (ML-1) and half a dozen special economic zones in the width and breadth of the country," the source said.

The much-touted 1,872-kilometre long ML-1 project is moving at a snail's pace due to China's reluctance to fund the project at a paltry 1% return on investment. China is also reportedly unhappy with the government's decision to trim the project's cost from $8.2 billion to $6.2 billion due to its rising debt load.

The slow execution of top-line CPEC projects, caused largely by China's lack of financing, figured high in a meeting held last month between newly appointed Chinese Ambassador Nong Rong and Pakistan's Foreign Minister Shah Mehmood Qureshi in Islamabad, sources say.

If China stands by its original CPEC commitments, it would build and finance at least eight SEZs in all four Pakistan provinces as well as in the Islamabad Federal Territory, the Port Qasam Federal Area, and Pakistan-administered Kashmir and Gilgit-Baltistan, which Pakistan recently declared as a province. Another SEZ will be built at Gwadar.

The Institute of Policy Reforms (IPR), a Lahore-based think-tank run by Pakistan Tehreek-e-Insaf's (PTI) senior leader Hamayun Akhtar Khan, claimed in a recent report, "Pakistan has slipped into a debt trap due to the government's failure to bring reforms and weak fiscal management."

In the research report titled "Pakistan's debt and debt servicing is the cause of concern," the IPR summed up that "We are in a debt trap that is entirely our own making. It is a risk to our national security. The government was borrowing to repay the maturing debt, which now seems to be a concern for all the political parties, businessmen and experts."

CommentsWhether Pakistan's move to give the military near-total control over the CPEC will reassure China that their investments are more secure, what is clear is that Beijing is backing away from Pakistan's $60 billion plank in the BRI, for reasons that until now are not altogether clear, Asia Times reported.
 

ezsasa

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China to invest $15 billion in petrochemical industry at Pakistan's Arabian Sea port

 

sydsnyper

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Source:
1. What is Evergrande?
Evergrande is the second largest Chinese property developer. It is the world's 122nd largest company/group by revenue, and the world's most valuable real estate company.

2. Context for the current situation?
In recent years, China has experienced a massive housing bubble. Many Chinese people are buying second or even third homes, as a long-term investment. However, these homes are rarely actually lived in, and housing demand in China is mostly met, so these prices are kinda artificial. This means the real estate market in China is basically a $12tn ponzi scheme, balanced on a knife-edge.

3. What's happening, and why?
Evergrande is on the brink of collapse. They have over $300bn in debt (mainly to other firms and banks, including major players like HSBC) They have been in deep water for a while now, however they have a big deadline to pay almost $85mm in interest coming up on Thursday, which could send them over the edge. $300bn is almost 2% of China's GDP. This means they probably won't be bailed out (as it would theoretically devalue the Yuan, assuming the Chinese govt prints some money to handle this). As the firm will not be bailed out, they will probably default on almost all of this debt. This is, as many financial analysts would say, pretty fucking bad. Many other firms in China are also massively overleveraged, and this could cause a large domino effect collapse of first Chinese real estate companies, and then have a knock-on effect on banks. Shares in another Chinese developer, Sinic Holdings, have already fallen by 87% today, and major indexes like the S&P 500 (USA) and FTSE (London) are sliding by a few per cent due to the uncertainty this is causing.

4. Should I be worried?
Maybe. This isn't a Lehman-size event, but the economy is pretty weak (despite what governments would want you to believe). We are still in the recovery from Covid, and this domino falling could start a pretty ugly few months. That, coupled with huge inflation and tax hikes due to Covid could spell bad times ahead. However, the situation is still uncertain. Evergrande have been in a bad place for a while, and while the situation is worsening, I believe the true collapse/restructuring of the firm could happen in a few days, but there's no guarantees. When a firm this large is collapsing everyone around them will try prop them up, because the butterfly effect from this will fuck everyone up anyway. Creditors will try to extend loans, etc etc. HOWEVER. Many of the Evergrande creditors have said they are reluctant to give the firm more room to breathe, so who knows. Time will tell. Be cautious, but don't panic. Yet.

EDIT 3: Apparently Chinese markets are closed until Wednesday, therefore the overall effect on the Chinese market is yet to be seen. Stay tuned.

FAQs
Do Evergrande hold any properties/developments in the West?

Not AFAIK.

Edit: Some commenters have informed me that Evergrande may have some holdings in the West, not nearly as significant as their holdings in China, however I need to corroborate this. Will do tomorrow morning. For now treat as unconfirmed.

How will this affect [stock/market/equity/good]?

IDK. Depends on a lot of factors. DM me if you reaaaaalllly need to know. Edit 2: Stop DMing me asking about the market as a whole. Mostly bad, how bad depends on how spectacularly the Chinese economy implodes. Some good plays to profit stand out but I won't reveal them because that's a liability on my part.

Will this cause any issues for me, living in the West?

Best case scenario: No

Mid scenario: Increases in prices of Chinese products, probably slight increases in costs of everything without the wage increase to match. Possibility of financial hardship in the mid-to-long term but will recover and come back as per usual.

Worst case: Large inflation, job losses, increased prices of most goods and services. Will have to cut spending down to bare essentials, mid-to-long term. However, will still recover.

Worst worst worst case scenario: End of civilization as we know it. (It's not gonna be this one)

I think the best advice is to set money aside, hold off on any luxury purchases or unnecessary spending and instead slowly stock up on shit which might become more expensive, but has a long shelf life and can still be consumed even if no crash occurs, such as tinned foods and toilet paper. No reason to panic tho.

TL;DR, Stay informed, don't make brash financial decisions without thinking about it. No frenzy/panic buying/selling/hoarding etc.
 

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