Sino-Pakistan relations have long thrived on military and strategic cooperation. Over time, this cooperation yielded economic dividends for Pakistan and public goodwill for China. Although military and strategic interests still dominate their relations, needs for stronger economic ties and active public diplomacy are growing in parallel. Beijing is responding to such needs with increasing trade and investment to help Pakistan’s economy, while Islamabad is creating tax-free “Exclusive Industrial Zones” (EIZs) to attract Chinese investment. These initiatives, however, have thus far benefited Chinese products which have “flooded Pakistan” to the grumblings of Pakistani manufacturers. Economic concerns brought on by the trade imbalance also ripple through political discourse in Pakistan, which has long been marked by a Sinophilic core.  As a result, China is now pursuing active public diplomacy to engage both economic and political actors in Pakistan to keep its strategic advantage with Islamabad intact.
To bridge the trade gap with Islamabad, China has already removed tariffs on 767 trade goods under the “Early Harvest Program” (EHP). The EHP has benefited Pakistan’s flagship exports such as textiles, surgical and sports manufactures. Starting in January 2006, all Pakistani exports to China will be exempt from tariff.  The EHP is a precursor to the establishment of a Free Trade Area (FTA), which will offer China and Pakistan more preferential trade terms than members of the World Trade Organization (WTO). This means India, to whom Pakistan denies the Most Favored Nation (MFN) status as a WTO member, will be locked out of a privileged trading position. The cool economic relations between India and Pakistan, despite rhetoric to the contrary, are reflected in their miniscule bilateral trade, which at $300 million is a fraction of their combined total trade of $200 billion a year.
In South Asia, Pakistan has a Free Trade Agreement with Sri Lanka only. Reduced tariffs between China and Pakistan are working to the advantage of Islamabad, which have led to a 26 percent increase in its exports to Beijing since 2004. These exports are dominated by cotton-based products such as yarn and fabric, which constitute 70 percent of Pakistan’s total trade with China. Most of Pakistan’s trade goods are directed at western China, accessible through Karakoram Highway (KKH), which runs through northwestern Pakistan to western China. To boost trade through KKH, China and Pakistan recently have built a Dry Port at the Sust check-point on Sino-Pakistan border that opens into China’s Muslim-majority autonomous region of Xinjiang. 
Over the past two years, there has been a dramatic increase in bilateral trade between China and Pakistan, which has now jumped to $2.5 billion a year, accounting for 20 percent of China’s trade with South Asia and 10 percent of Pakistan’s total trade of about $25 billion in 2004. China has now become Pakistan’s largest trading partner in Asia, surpassing even Japan. Informal trade between China and Pakistan comes to several times the official trade. Yet China dominates the two-way trade. In 2003-2004, its exports to Pakistan were valued at $1.3 billion as compared to Pakistan’s $870 million to China. China is concerned about this trade imbalance, and willing to reverse it in Pakistan’s favor. Prime Minister Wen Jiabao, during his recent visit to Islamabad on April 5-7, proposed that Pakistan increase rice export to Beijing to close the trade gap. Rice is Pakistan’s second major foreign exchange earner after cotton. Under the EHP, China has already removed tariffs on rice imports from Pakistan.
More importantly, Chinese investment in Pakistan has increased to $4 billion, a 30 percent increase since 2003. Of 500 foreign firms working in Pakistan, 60 are Chinese, which employ over 3,000 Chinese nationals. Most of the Chinese companies are working on energy and infrastructural projects, such as hydroelectric power projects, nuclear power production, exploration of natural gas and oil resources, extraction of coal, building of rail and road networks, telecommunications, water dams and a deep sea port at Gwadar, Baluchistan. The Gwadar port alone will generate more than a million jobs and a transit economy worth billions of dollars a year. In all, Chinese companies are working on 114 projects in Pakistan. 
To enlist China’s private firms into investing in Pakistan, the former Chinese Premier Zhu Rongji, during his visit to Pakistan on May 11-15 of 2001, approved $500 million in preferential buyers’ credit for non-state Chinese companies to invest and initiate joint ventures in Pakistan. In November 2003, China agreed to finance the $740 million Chashma II project, which features a 300-megwatt nuclear power plant. As recently as December 14-18, 2004, the Pakistani Prime Minister made a five-day visit to China, leading an 80-member delegation of business and government leaders. His trip yielded seven major agreements, many in such untapped sectors as housing, agriculture, and food processing.  During this visit, Prime Minister Aziz also announced the granting of market economy status to China, which would reduce or remove tariffs on Chinese exports to Pakistan. Aziz’s Chinese counterpart urged him to put the exploration of energy resources at the top of their bilateral agenda. Besides these investment opportunities, Pakistan is eager to benefit from the development boom in Western China, where Beijing is investing 730 billion Yuan (roughly $88 billion), to develop its nine provinces and autonomous regions, including Xinjiang, which together make up western China.
In addition to broadening and strengthening economic ties, China is expanding inter-state relations into inter-people bonds. Since the inception of its diplomatic relations with Pakistan, China had exclusively focused on state-to-state relations that remain unrivaled to this day. China’s potential competitors in public diplomacy, however, have been the United States and India – in that order. The U.S.’s close economic, military, and strategic ties with Pakistan in the 1960s and 1980s engendered a groundswell of support for the U.S. across a wide swath of the Pakistani population. In the 1980s, the U.S. further deepened the popular goodwill by taking in the largest-ever wave of immigrants from Pakistan. Similarly, the 1990s saw relations between India and Pakistan improve, which opened the path to increased people-to-people contacts. These contacts contributed to moderating the estranged state-to-state relations by offering “private solutions” to such difficult questions as the decades-old Kashmir dispute. These private initiatives came to be known as Track-II diplomacy.
On the other hand, China bitterly remembers the effect of U.S. influence on Pakistan in the 1960s that kept it from siding with China over the Sino-Indian war in 1962. Now that India has started making inroads into Pakistan, China has become further unnerved. What works to the advantage of India and the U.S. are linguistic bonds with Pakistan. Pakistanis generally communicate more easily with Indians as well as Americans. They also are drawn to Indian and U.S. cultures, especially movies, music, and television programming, which they find accessible because of their familiarity with Hindi and English. With China, language is such a huge barrier that even “higher-than-Everest Sino-Pakistan friendship” cannot surmount it. Having been aware of this barrier, the Chinese are now investing in language education in Pakistan. They are opening a Chinese Language Center (CLC) in Islamabad to boost linguistic ties. The CLC will prepare young Pakistani scholars, professionals, and government and business leaders for training in China. The CLC will be supplemented with a student-exchange program to educate Pakistani students at Chinese Universities and professional colleges. Initially, the Chinese government will begin the program with an offering of 30 scholarships to Pakistani students, while it will send 100 students of its own to Pakistani schools. 
Similarly, China is working on Pakistani media to cultivate further favorable public opinion about Beijing. Pakistani media have, of late, been critical of China’s treatment of its Muslim minority in general and the Uigher Muslims in particular. Last year, China invited a large group of Pakistani journalists to visit Xinjang, where they were introduced to the “three evils of extremism, splittism, and terrorism.” Chinese officials portray the Uigher independence movement as representing this threefold sin. They briefed the visiting Pakistani journalists on the first-ever Sino-Pakistan joint military exercises, which were billed as “Friendship 2004.” These exercises were held in August 2004 in northwest Xinjiang with an aim “to root out the evil of extremism, splittism, and terrorism.” Such trips paid off handsomely. One of the returning journalists sanctimoniously wrote: “That China and Pakistan…should engage in serious efforts to root out the monster of separatism and extremism from a part of the Chinese territory (i.e., Xinjiang) was a moral need…” 
However, some apparently dubious business dealings, such as China’s no-bid contract for a $700 million Chasma II nuclear power plant and its 69 defective locomotive engines supplied to Pakistan Railways have contributed to Pakistani media’s skeptical view of China. More importantly, the Gwadar port project, which most Pakistanis view as the plunder of Baluchistan’s natural wealth, has stirred emotions all across Pakistan. Besides Gwadar port, Chinese companies are engaged in several development projects in Baluchistan, including, but not limited to, the exploration of oil and natural gas, the building of extensive road network, and the most lucrative Saindak Gold and Copper mining project. One influential newspaper editorialized about the highly skewed distribution of proceeds from the Saindak Gold-Copper Mining Project: “In the Saindak project, the Chinese get 74 percent, the federal government (of Pakistan) 25 percent, and the province (i.e., Baluchistan) only 1 percent.” 
To blunt media criticism with stronger cultural ties, China also is mobilizing Pakistani civic organizations and civic leaders. During his April 5-7 visit to Pakistan, Chinese Premier Wen Jiabao flew into Lahore on April 6, where the Pak-China Friendship Association was first founded, to honor the Association and its place of birth. The Chief Minister of the province of Punjab, of which Lahore is the capital city, hosted a reception for him. Speaking at the reception, Premier Wen singled out a Pakistani, Mr. Mukhtar Ahmad Khan, for his dedicated services to promote Sino-Pak friendship. While analogizing the friendship between China and Pakistan as a drink of water, Premier Wen invoked a Chinese saying: “When you have water, don’t forget the one who has dug the well.”  Then, he went on to honor Khan as that legendary digger of the well of Sino-Pak friendship. Anticipating future challenges, however, Prime Minister Wen asked his audience to help grow the tree of Sino-Pak friendship strong, as “only a strong tree can weather hailstorms.” 
Despite efforts at public diplomacy, it is China’s ever-growing strategic advantage with Pakistan that overrides all other concerns. Prime Minister Wen’s host, Chief Minister of Punjab, while referring to the Indo-Pak war of 1965, summed up Beijing’s strategic advantage succinctly: “…the people of this city cannot forget the day when Lahore was attacked forty years ago. It was their friendship with China that stood between Lahore and the enemy as the Great Wall of China.” 
Challenges remain in the 21st century for China-Pakistan friendship. However, the strategic interdependence of the two countries is compelling each to bond with the other. China is taking the lead to employ economic and public diplomacy with Pakistan to broaden its strategic state-to-state partnership into people-to-people bonds. With increasing trade and investment, China is helping a turnaround in the Pakistani economy. Parallel to economic relations, it also is expanding cultural linkages through education, civic society, and media to strengthen the tree of Sino-Pak friendship to weather unanticipated “hailstorms.”
1. “Development and Violence (editorial).” The Nation, Lahore (Pakistan), January 10, 2005.
2. “Exports to be Tax-free in Next Few Years.” The Nation, Lahore (Pakistan), June 15, 2005.
3. “Sust Dry Port Starts Functioning.” The Dawn, Karachi (Pakistan), June 3, 2005.
4. “China, Pakistan to Strengthen Defense Ties.” The Dawn, Karachi (Pakistan), December 17, 2004.
5. “China, Pakistan Sign 7 Accords in Vital Sectors: Oil, Gas Exploration, High-level Trade, Gwadar Port Improvement.” The Dawn, Karachi (Pakistan), December 16, 2004.
7. Bokhari, Ashfak (2004). “Identity Crisis in Kashgar.” The Dawn, Karachi (Pakistan), Magazine Section, December 12, 2004.
8. “Development and Violence (Editorial).” The Nation, Lahore (Pakistan), January 10, 2005.
9. “Wen for Free Trade Zones.” The Nation, Lahore (Pakistan), April 7, 2005.