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Home | Opinions | Economic | China needs a win in Afghanistan to keep its edge in Asian trade

China needs a win in Afghanistan to keep its edge in Asian trade

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China needs a win in Afghanistan to keep its edge in Asian trade
 China wants to help build infrastructure in poor, war-weary Afghanistan to further its regional economic expansion.
China wants to help build infrastructure in poor, war-weary Afghanistan to further its regional economic expansion.
Chinese economic relations with Pakistan offer a textbook case for what Beijing wants from other countries. The pair with a 523-kilometer (324-mile) long mountainous border hit it off in 1963, when each ceded land to the other. The friendship has weathered geopolitical changes since then largely because China is helping Pakistan build infrastructure projects through a three-year-old, $62 billion deal called the China Pakistan Economic Corridor. A corridor also implies some sort of through traffic. China is using this one to chase stronger economic ties with Afghanistan, a poor, land-locked country more often known for the sectarian civil wars that have stymied both Moscow and Washington, among others, since the 1970s. Investors seldom put it on their A-lists -- investor protection in Afghanistan rank below that of South Asia, Europe and the United States, Spanish financial firm Santander Trade says.
But China isn’t your usual investor. It sees the Afghanistan as a prime spot for new highways and railways that would facilitate trade for both sides and beyond, experts say.
Chinese contractors have experience in frontier-land investments after working with countries in Africa over the past decade, and since 2013 as part of its 65-nation “Belt-and-Road” initiative for regional trade promotion. China invested $3.2 billion in Africa as of last year. In 2015 it pledged another $60 billion in new capital projects. Belt-and-Road is projected to cost at least $900 billion. “China would probably see the instability in Afghanistan as more of an opportunity than would most countries,” says Stuart Orr, professor of strategic management at Deakin University in Australia.
Afghanistan happens to be a particularly urgent matter. Beijing's regional rival India is bidding to help the country with hospitals, dams and roads, says Mohan Malik, professor at the Asia-Pacific Center for Security Studies in Honolulu. Indian aid is “popular” with Afghanis, he says. Asia's two largest countries are ever vying for geopolitical influence.
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Another risk: Afghani “non-state actors” have the power to support for anti-government Muslims in the nearby Chinese region of Xinjiang, says Sameer Lalwani, senior associate and South Asia Program co-director at the Stimson Center think tank in Washington.
“China recognizes there may be some mining industry and other extractive opportunities in Afghanistan, but it likely appreciates the front-end conflict management and stabilization costs are quite high to harvest these,” Lalwani says. “Therefore, the more likely strategic objectives in Afghanistan are to contain instability from spilling out and disrupting its other economic equities in the region.”
A bigger Chinese-led trade network Pakistan comes into play because it eagerly welcomes Chinese infrastructure, such as two railway lines being planned. China’s rugged border with Afghanistan runs just 76 kilometers, but the Afghan-Pakistan line covers 4,250 kilometers (2,640 miles). Extending a road or railway line across the longer border would be relatively straight forward. From Afghanistan, transportation corridors might push westward into oil-rich Iran and even Turkey.
“From a long-term perspective, establishing a trade route through Pakistan and Afghanistan would introduce the option of increasing the ease of trading directly with Iran, from whom China currently gets the bulk of its oil and has significant two-way trade,” Orr says. “Establishing a direct trade route to Iran would then open the doors to increased trade with Turkey.”
The China-Pakistan corridor’s official website suggests Afghanistan would join a broader regional network anchored by Chinese infrastructure. The corridor “will not only benefit China and Pakistan but will have positive impact on Iran, Afghanistan, India, Central Asian Republic, and the region,” it says.
China was trying late last year to broker peace between Afghanistan and Pakistan, apparently to send friendly signals to both.
China is already Afghanistan’s biggest investor. In 2007 a Chinese firm took a $3 billion, 30-year lease for the Aynak copper mine in Afghanistan, while the two countries established a railway link in September 2016, allowing freight to travel from far eastern China to the Afghani rail port of Hairatan. Shipments over that distance now take two weeks, down from six months by road, Santander Trade says.
The railway link should boost Afghani exports into China, while allowing more investment from China, it adds.
Companies from China have further expressed interest in the construction of a hydroelectric plant and a railway project in Afghanistan. “China is busy in reconstruction activities, signing heavy aid packages and investing generously in Afghanistan's economy to bring stability in the war torn country,” business consultancy MorrisAnderson says here.

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