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Sharif’s trip to Beijing: Can the China-Pakistan Economic Corridor be revived? | Business and economic news
Islamabad, Pakistan – Pakistan Prime Minister Shehbaz Sharif is scheduled to fly to China on June 4 for a five-day trip that will see him interact with Beijing’s leadership at a time when Islamabad has reached trust more and more in its alliance with the second largest economy in the world.
Sharif will visit Beijing, Xi’an and Shenzhen – the southern city that China holds up as an example of its dramatic economic rise since the 1980s. Shenzhen was handpicked by then-leader Deng Xiaoping as the country’s first special economic zone.
As Pakistan similarly seeks to lift its economy out of stagnation in the midst of high inflation and a debt crisis, a multibillion-dollar economic project is at the heart of its ambitions:
The $62 billion China-Pakistan Economic Corridor (CPEC), formally launched in 2015 by the two Asian nations, has been criticized by governments and many analysts in both countries as a “challenging player”For Pakistan’s economy. It included the construction of an iconic seaport, power plants and road networks across the South Asian country.
However, almost a decade later, doubts hover over the future of the project.
CPEC is a key component of China’s ambitious Belt and Road Initiative (BRI), a huge network of roads, bridges and ports spread across nearly 100 countries that Beijing hopes will recreate the ancient Silk Road trade routes linking Europe and Asia.
But critics say the BRI is a vehicle for China to expand its geopolitical influence and puts poorer countries, like Pakistan, under greater debt.
In Pakistan, the project included the construction of a seaport in Gwadar in the south, along with the development of the country’s energy, transport and industrial sectors. Although there were initial successes, CPEC had a difficult journey in Pakistan due to the country’s frequent political, economic and security crises and was effectively halted.
Now, a newly elected government in financially strapped Pakistan is making a renewed effort to strengthen CPEC.
Why Pakistan needs CPEC
Almost 40% of Pakistan’s 241 million people are below the poverty line, according to the World Bank. Inflation, which reached a devastating 40% a year ago, is now around 20%. An opinion poll ahead of February’s national elections suggested that nearly 70 percent of Pakistanis believe their economic condition will continue to get worse.
In 2015, when Sharif’s elder brother and three-time prime minister Nawaz Sharif entered CPEC with China, Pakistan was facing a massive electricity crisis, hampering its industrial growth. Islamabad used CPEC to develop a series of energy projects, despite warnings of accumulating more debt.
Gwadar, the coastal city in the southwestern province of Balochistan, was chosen to host CPEC’s crown jewel: a deep-water port that could transform the city into a bustling economic hub. Meanwhile, a nationwide network of highways has been announced, with the aim of providing connectivity from the city of Kashgar in southwest China to Gwadar, more than 2,000 kilometers (1,242 miles) away.
According to Ammar Malik, senior researcher at AidData, a research center at the College of William and Mary in the United States, although CPEC has undertaken some infrastructure and energy sector projects, it has struggled to deliver more tangible benefits to Pakistan’s economy.
“CPEC has certainly improved sectors such as transport or energy or provided improvements in Pakistan’s ability to produce electricity, but these benefits need to be translated into economic productivity and economic growth, which has not happened,” Malik told Al Jazeera.
Government data on the CPEC website corroborates this statement. CPEC lists 95 projects, the largest of which is around US$33 billion planned as investments in the energy sector.
Data indicates that of the 21 energy projects, 14 have been completed so far, with a combined capacity of 8,500 megawatts, while two others are under construction and five have not yet started. Likewise, of the 24 proposed transport-related projects, only six have been completed and 13 have not yet been subject to any work.
CPEC, according to the 2015 plan, was supposed to include nine Special Economic Zones (SEZs) – designated areas with lenient trade laws to promote growth. But none have been completed so far, with work ongoing on four of them.
CPEC is estimated to generate more than two million job opportunities for Pakistanis, but government data says less than 250,000 jobs have been created so far.
Meanwhile, Pakistan’s debt continued to rise, putting serious pressure on its economy. When Nawaz Sharif came to power in 2013, Pakistan’s external debt was $59.8 billion. Today, as his brother leads the nation, the same obligations have increased to $124 billion – of which $30 billion is owed to China.
The debt burden on Pakistan’s dwindling foreign exchange reserves has crippled a country heavily dependent on imports. Its central bank currently has $9 billion, enough to cover two months of imports. The currency crisis forced Islamabad to turn to close allies, including China, to bolster its economy.
Pakistan is also negotiating with the International Monetary Fund (IMF) another bailout package – the 24th since 1958.
But why is China cautious?
The Chinese have repeatedly extended repayment deadlines for Pakistani loans, including about $2 billion owed earlier this year. But China has its own concerns.
Just this yearfive Chinese nationals working on various CPEC projects were killed in attacks by armed groups, who openly admitted to targeting Chinese interests in Pakistan.
Dozens of Chinese workers have been killed across Pakistan since 2018, particularly in Balochistan, where an armed rebellion against the Pakistani state has been ongoing for several years. Baloch rebels now blame Chinese projects in the province as a theft of their resources.
Five Chinese citizens were killed in an attack on their bus in Khyber Pakhtunkhwa in March this year. [EPA]Stella Hong, a postdoctoral fellow in China public policy at the Harvard Kennedy School’s Ash Center, told Al Jazeera that Pakistan’s security situation “remains the most immediate concern” for the Chinese and could have an impact on their futures. investments in the country.
“The violent incidents are also testing the mutual trust of the two governments. There may be growing reservations from both countries about the other side’s commitment to this relationship,” she said.
Khalid Mansoor, who headed the government’s CPEC Authority for nearly nine months before being replaced in April 2022, said the main requirement of the Chinese is foolproof security.
“But despite the recent attacks, I can say this with confidence that the Chinese remain committed to the [CPEC] project,” he told Al Jazeera.
Weak governance
According to AidData’s Malik, the other big concern for the Chinese is governance – or lack thereof.
“In any good partnership, there are two partners and over the years I have heard the Chinese complain about not being facilitated in doing their jobs. The support they seek has not been given to them,” he told Al Jazeera.
Hong agreed, saying Pakistan needs to do more if it expects Chinese companies to relocate and expand operations in the country.
“Companies need to be able to run viable businesses if they want to move into Pakistani SEZs or even Pakistan in general. But many seem to have become frustrated with the difficulties of getting things done in Pakistan,” she said.
But economist Safdar Sohail, who was part of the government panel that oversaw the implementation of the CPEC project when it was launched, hoped that the creation of a Special Investment Facilitation Council (SIFC) could help resolve the governance issue.
Shehbaz Sharif formed the SIFC in his previous term as prime minister last year. The government body, represented by senior civilian and military officials, is intended to serve as the main decision-making forum to ensure the execution of economic policies.
Safdar believes that the SIFC will also be able to eliminate the bureaucratic issues that have affected the pace of CPEC projects in Pakistan.
“But I think to really harness the potential of CPEC, we need to have a forward-looking plan, rather than short-term projects that can only increase our debt burden,” he told Al Jazeera.
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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