Pakistan and china relations

Submitted to: Miss. Ayesha hanif

Submitted by:

Myrah Anwaar 43 Sidra Awan 38 Sara Amjad 40 Ridha Masood 32 Aimen Siddique 36 Javaria Jamil 02

Table of Contents Executive summary: i China: 1 Pakistan 1 Introduction: 2 Background : 3 Sino-Indian war: 4 Timeline of Important events: 5 Diplomatic relations: 6 China support on Kashmir issues: 6 Sino Pakistan boundary agreement 6 China –us relation with the help of Pakistan 7 China support after 9/11 8 Trade relations: 10 Free Trade Agreement: 10 Exports: 12 Imports: 13 Kashgar Special Economic Zone (KSEZ): 14 Thar Coal Project: 15 Influence of china-india trade relation on pakistan : 15 Pakistan-china military relation 17 China and Pakistan defense ties 17 The Indian influence in military relations: 19 GEO-STRATEGIC IMPORTANCE OF PAKISTAN 20 Location of Gwadar port: 20 CONSTRUCTION OF GWADAR PORT: 20 GEO-STRATEGIC SIGNIFICANCE OF GWADAR 20 CHINA’S INTERESTS: 20 PORT OPERATIONS: 21 INDIAN CONCERNS: 21 The balancing act: 23 Regional Cooperation: 24 Nuclear cooperation: 25 Major completed projects: 25 projects underway: 25 Some current issues: 28 The Indian question: 28 Conclusion: 31 Bibliography: 32

ACKNOWLEDGEMENT

First and foremost, we would like to say thanks to our instructor of this Report, Mrs. Ayesha Hanif for her valuable guidance and advice. She inspired us greatly to work in this report. Her willingness to motivate us contributed tremendously to our work. Besides, we would also like to thank the authority of Institute of Administrative Sciences, University of the Punjab for providing us a good environment and facilities to complete this report. We also thank our group members for their support in completing this report.

Thank You

Executive summary:

China–Pakistan relations began in 1950 when Pakistan was among the first countries to break relations with the Republic of China on Taiwan and recognize the PRC. Relations between Pakistan and China are very brotherly. Both countries have placed considerable importance on the maintenance of an extremely close and supportive relationship. Since then, the two countries have regularly exchanged high-level visits resulting in a variety of agreements.
China adopted a neutral stance towards the South Asian region in general and towards Indo-Pakistan conflicts in particular. China toned down its vocal support to Pakistan on the Kashmir issue. It gradually shifted its stance from support of the right to self-determination for the Kashmiri people to a peaceful solution of the issue
Pakistan have very strong military, trade, economic and diplomatic relations. Pakistan was a key ally for China throughout the Cold War period in coping with India and the Soviet Union until the Gorbachev and Beijing reached and acceded to certain demands. However, many advantages were also accrued to Pakistan as a result of its alliance with a more culturally diverse, communist country like China. It furthered Pakistan’s security, rendered Pakistan weaponry in the 1965 war with India and China adopted a pro-Pakistan stance on the Kashmir dispute.
However with the dawn of the current century, China’s relations with India and Russia have undergone a dramatic shift in strategic partnership from enmity to entente. In the case of Pakistan and India, the uncertain triangle of China-Pakistan-India has historically been constructed around the lines that the dilution of China’s relations with one country provides an impetus to China’s improvement in relations with other country.

General information about Pakistan and china:
China:
China, officially the People's Republic of China, is a sovereign state located in East Asia. It is the world's most populous country, with a population of over 1.35 billion. Capital: Beijing Population: 1.344 billion (2011 President: Xi Jin pingCurrency: RenminbiGross domestic product: 7.318 trillion USD (2011) Government: Single-party state, Socialist state, Communist statePakistan:Officially the Islamic Republic of Pakistan is a sovereign country in South Asia. With a population exceeding 180 million people, it is the sixth most populous country in the world. Capital: IslamabadNational anthem: Qaumī TarānaCurrency: Pakistani rupeePresident: Asif Ali ZardariOfficial languages: Urdu Language, English LanguageGovernment: Parliamentary republic, Federal republic | |
Pakistan-Sino relations:
Introduction:

China–Pakistan relations began in 1950 when Pakistan was among the first countries to break relations with the Republic of China on Taiwan and recognize the PRC. Relations between Pakistan and China are very brotherly. Both countries have placed considerable importance on the maintenance of an extremely close and supportive relationship. Since then, the two countries have regularly exchanged high-level visits resulting in a variety of agreements. The PRC has provided economic, military and technical assistance to Pakistan and each considers the other a close strategic ally.
Bilateral relations have evolved from an initial Chinese policy of neutrality to a partnership that links a smaller but militarily powerful Pakistan, partially dependent on China for its economic and military strength, with China attempting to balance competing interests in the region. Diplomatic relations were established in 1950, military assistance began in 1966, a strategic alliance was formed in 1972 and economic co-operation began in 1979. China has become Pakistan’s largest supplier of arms and its third-largest trading partner. Recently, both nations have decided to cooperate in improving Pakistan's civil nuclear power sector.
Favorable relations with China are a pillar of Pakistan's foreign policy. China supported Pakistan's opposition to the Soviet Union's intervention in Afghanistan and is perceived by Pakistan as a regional counterweight to NATO and the United States. China and Pakistan also share close military relations, with China supplying a range of modern armaments to the Pakistani defense forces. China supports Pakistan's stance on Kashmir while Pakistan supports China on the issues of Xinjiang, Tibet, and Taiwan. Military cooperation has deepened with joint projects producing armaments ranging from fighter jets to guided missile frigates.

Background :

Pakistan has a long and symbiotic relationship with China. The long-standing ties between the two countries have been mutually supportive. A close identity of views and mutual interests remain the hallmark of bilateral ties. Since the 1962 Sino-Indian War, Pakistan has supported China on most issues of importance to the latter, especially those related to the question of China's sovereignty like Taiwan, Xinjiang, and Tibet and other sensitive issues such as human rights.
During the first decade of their diplomatic ties, relations between China and Pakistan developed slowly mainly because of their respective affiliation with opposite security blocs. China affiliated with the Communist bloc led by the Soviet Union and also developed close ties with India. Pakistan, on the other hand, joined the U.S.-led anti-Communist bloc and entered into defence pacts such as the Southeast Asia Treaty Organization (SEATO) and the Central Treaty Organization (CENTO) and mutual defence agreement in 1954, 1955 and 1959, respectively. Despite that, there was no open hostility between the two sides. The Bandang Conference in 1955 was the first high-level contact between Pakistani and Chinese leadership which clarified mutual doubts, particularly those arising out of Pakistan’s entry into SEATO and CENTO. It was there that Pakistan’s Prime Minister, Muhammad Ali Bogra, made clear to his Chinese counterpart, Zhou Enlai, that Pakistan’s membership in SEATO and CENTO was not directed against China but against India. He further said that Pakistan’s membership of SEATO did not imply that Pakistan was against China, and that Pakistan did not fear any aggression from Communist China. He assured the Chinese prime minister that if the United States took aggressive action against China, Pakistan would not become a party and it would remain neutral as in the Korean War.2 Premier Chou Enlai accepted Pakistan’s assurances of not having any aggressive attitude towards China. He mentioned in his speech to the political committee of the Afro-Asain Conference that Pakistan was not against China and had no fears that China would commit aggression against it. As a result, mutual understanding was reached.
The Chinese leadership has acknowledged Pakistan's steadfast support on key issues. Pakistan helped China in reestablishing formal ties with the West, where they helped make possible the 1972 Nixon visit to China. Pakistan has collaborated with China in extensive military and economic projects, seeing China as a counterweight to India and the United States. Pakistan has also served as a conduit for China's influence in the Muslim world.
China also has a consistent record of supporting Pakistan in regional issues. During the Pakistan-Indian tensions in 2008, it implied that it would support Pakistan in the event of a war. Pakistan's military depends heavily on Chinese armaments, and joint projects of both economic and militaristic importance are ongoing. China has supplied equipment to support Pakistan's nuclear program, and has provided nuclear technology to Pakistan.
Sino-Indian war:

In this hostile environment, events in early 1960s brought China and Pakistan closer to each other. The emergence of Sino-Indian hostility, Pakistan’s disappointment with its Western allies, New Delhi’s refusal to accept Pakistan’s proposal for joint defence of the subcontinent, and U.S. support for India against China were the major events which led China and Pakistan to take a fresh look at their policies vis-à-vis each other. Pakistan felt insecure in view of the massive military aid to India by Western powers against China, which could equally be used against Pakistan. The magnitude of U.S. concern in arming India against China could perhaps be measured in economic terms. Earlier, the total American aid to India since the latter’s independence was officially valued at somewhat over $1,705 million, which included $931 million in agricultural commodities.
As against this amount, in a short period of less than four years, from 1959 to 1963, India received $4 billion from the U.S.7 Pakistan began striking a more independent line in the conduct of its foreign relations. The change in Pakistan’s foreign policy was reflected in the fact that in December 1961, Pakistan voted in favour of the People’s Republic of China’s seat in the United Nations
, Pakistan has supported China on most issues of importance to the latter, especially those related to the question of China's sovereignty like Taiwan, Xinjiang, and Tibet and other sensitive issues such as human rights Timeline of Important events:

1950 – Pakistan becomes the third non-communist country, and first Muslim one, to recognize the People's Republic of China.
1951 – Beijing and Karachi establish diplomatic relations.
1963 – Pakistan cedes the Trans-Karakoram Tract to China, ending border disputes.
1970 – Pakistan helps the U.S. arrange the 1972 Nixon visit to China.
1978 – The Karakoram Highway linking the mountainous Northern Pakistan with Western China officially opens.
1980s – China and the U.S. provide support through Pakistan to the Afghan guerrillas fighting Soviet occupational forces.
1986 – China and Pakistan reach a comprehensive nuclear co-operation agreement.
1996 – Chinese President Jiang Zemin pays a state visit to Pakistan.
1999 – A 300-megawatt nuclear power plant, built with Chinese help in Punjab province, is completed.
2001 – A joint-ventured Chinese-Pakistani tank, the MBT-2000 (Al-Khalid) MBT is completed.
2002 – The building of the Gwadar deep sea port begins, with China as the primary investor.
2003 – Pakistan and China signed a $110 million contract for the construction of a housing project on Multan Road in Lahore.
2008 – Pakistan welcomes the Chinese Olympic Torch in an Islamabad sports stadium, under heavy guard amidst security concerns.
2008 – China and Pakistan sign a free trade agreement.
2008 – Pakistan and China to build a railway through the Karakoram Highway, in order to link China's rail network to Gwadar Port.
2008 – The F-22P frigate, comes into service with the Pakistani Navy.
2009 – The ISI arrest several suspected Uyghur terrorists seeking refuge in Pakistan.
2010 – Pakistan and China conduct a joint anti-terrorism drill.
2010 – China donates $260 million in dollars to flood hit Pakistan and sends 4 military rescue helicopters to assist in rescue operations.
2010 – Wen Jiabao visits Pakistan. More than 30 billion dollars worth of deals were signed.
2011 – Pakistan is expected to buy air to air SD 10 missiles from China for its 250 JF 17 thunder fighter fleet
2013 - Management of Gwadar port is handed over to state-run Chinese Overseas Port Holdings after previously being managed by Singapore’s PSA International and it becomes a matter of great concern for India.
2013 – Chinese Premier Li Keqiang visits Pakistan. Trade between China and Pakistan hit a 12-month figure of $12 billion for the first time in 2012.
Diplomatic relations:
China support on Kashmir issues:

China adopted a neutral stance towards the South Asian region in general and towards Indo-Pakistan conflicts in particular. China toned down its vocal support to Pakistan on the Kashmir issue. It gradually shifted its stance from support of the right to self-determination for the Kashmiri people to a peaceful solution of the issue.
According to free press Kashmir.com on February 19, 1998 :
Pakistan said on Thursday that china supported its demand for a U.N sponsored vote to resolve Islamabad’s long-lasting dispute with India over Kashmir. Chinese leaders gave the assurance to Pakistani prime minister Nawaz Sharif during his February 11-17 visits there, a foreign ministry spokesman told reporters at a news briefing.
“They supported clearly an early solution of the Kashmir dispute in accordance with the UN resolutions”
Sino Pakistan boundary agreement

The Sino-Pakistan Agreement (also known as the Sino-Pakistan Frontier Agreement and Sino-Pak Boundary Agreement) is a 1963 document between the governments of Pakistan and China establishing the border between those countries. It resulted in China ceding over 1,942 square kilometers (750 sq mi) to Pakistan and Pakistan recognizing Chinese sovereignty over hundreds of square kilometers of land in Northern Kashmir and Ladakh. The agreement is controversial, not recognized as legal by India, which also claims sovereignty over part of the land. In addition to increasing tensions with India, the agreement shifted the balance of the Cold War by bringing Pakistan and China closer together while loosening ties between Pakistan and the United States.

China –us relation with the help of Pakistan

Richard Nixon's 1972 visit to the People's Republic of China was an important step in formally normalizing relations between the United States and the People's Republic of China (PRC). It marked the first time a U.S. president had visited the PRC, which at that time considered the U.S. one of its staunchest foes, and the visit ended 25 years of separation between the two sides. When Bangladesh was separate from Pakistan America sympathies with Pakistan because of various reasons. Among them two reasons were that: firstly, Pakistan belonged to American led military Pact, CENTO and SEATO; secondly, US believed any victory of India will be considered as the expansion of Soviet influence in the parts gained by India with the victory, as it was believed to be a pro Soviet nation, even though they were non aligned.

This brought China in the picture. US needed help from China and the messenger was Pakistan. US *approached China*very secretly*on this issue, who was more than welcoming as itbelieved that their relations with US could improve from this onward.

During the second week of July, 1971, Kissinger arrived in Beijing, where he heard the words by then Chinese Prime Minister Zhou Enlai: "In our opinion, if India continues on its present course in disregard of world opinion, it will continue to go on recklessly. We, however, support the stand of Pakistan. This is known to the world. If they [the Indians] are bent on provoking such a situation, then we cannot sit idly by.' On this, Kissinger responded that China should know that the US also backs Pakistan on this issue.

China support after 9/11

Since 9/11, Pakistan has increased the scope of Chinese influence and support by agreeing to a number of military projects, combined with extensive economic support and investment from the Chinese. This is partially due to Pakistan's strategy of playing off the two powers against each other, but also a genuine effort to prevent America's influence in the region from becoming too strong. In return, the Chinese hope to strengthen Pakistan as a counterbalance to American and Indian influence.

Trade relations:

On May 25, 2013 china prime minister visit Pakistan signifying the close relations between the two countries. During the visit, Pakistani president Asif Ali Zardari said, "Our top priority is to further strengthen economic linkages."
China and Pakistan are close and friendly neighbors. Pakistan has treated China as its most important economic partners. Rapid economic development in China and consequent inter-regional activity has caused increased demand for raw materials, exchange of parts, components, intermediate products and development of cross country production works and processes. Consistent growth in economic relations amplifies the strength of their relationship. China and Pakistan also have witnessed steady growth in mutual investments in recent years. The Chinese have invested in Pakistan in telecommunications, energy, infrastructure, heavy engineering, IT, mining and defense related industries.
Pakistan and China are already co-operating closely in the development of Gwadar Port, which would help economic activity in Pakistan and provide an important access route to the sea for China’s Western regions, Afghanistan and Central Asian states. A large number of important projects such as the up-gradation of Karakoram Highway, Thar Coal Mining, up-gradation of Pakistan Railways and Power Generation Projects – both nuclear and non-nuclear – are some of the examples of this expanding economic cooperation.

Free Trade Agreement:
Pakistan and China signed a Free Trade Agreement in 2008. The base year for tariff reduction/elimination for China was 2006 and for Pakistan fiscal year of 2006-2007. Pakistan received market access at zero duty on industrial alcohol, cotton fabrics, bed-linen and other home textiles and other goods. China also reduced its tariff by 50% on knitwear and woven garments. Trade between Islamabad and baijing now howers around $7 billion a year, and both sides are set on raising the figure to $15billion by 2010.
Bilateral trade had reached US$ 5.79 billion in 2011. The balance is, however, in favour of China. The balance of trade increased from US$ 2.34 billion in 2007-08 to US$ 2.5 billion in 2010-11. Important factor of trade deficit with China is growing exports of Chinese products to Pakistan including raw materials and capital goods. Since these are more economical, businessmen are inclined to buy more from China.
Trade relations began shortly after the establishment of diplomatic ties in the early 1950s, and the two countries signed their first formal trade agreement in 1963. At present, over 60 chinese companies have permanent offices in Pakistan. Both countries have established economic zones in Pakistan to produce industrial products for duty-free export to China. Pak-China joint investment company will serve as a bridge between Pakitan and China entrepreneurs. NORINCO, a Chinese company is to cooperate in oil exploration and defense production sectors, while SINOHYDRO is already in Pakistan on hydro-power project. Another company ETC is to cooperate for THAR COAL PROJECT., while CIWEC will invest $1.7 billion for generating hydel electricity in Pakistan.
Pakistan, therefore, should be looking at China not simply as an export market, but as a primary source for import of capital goods and industrial raw material.
Table-1 shows trade balance between Pakistan and China. It is however encouraging that over the last five years, average rate of growth in exports from Pakistan has been 33% while average increase in imports from China was 19%. Pakistan and China will enter Phase II of FTA in 2013 when the present FTA will conclude by the end of 2012. Table 1: Pak-China Trade (Value: US $ Million) | Year | Exports | Imports | Trade Balance | 2005 - 06 | 437 | 1,843 | - 1,406 | 2006 - 07 | 548 | 2,321 | - 1,773 | 2007 - 08 | 685 | 3,029 | - 2,344 | 2008-09 | 661 | 2,708 | - 2,344 | 2009-0 | 1,211 | 3,284 | - 2,073 | 2010-11 | 1,645 | 4,145 | - 2,500 | Source: (i) Trade Development Authority of Pakistan. (ii) State Bank of Pakistan. | Exports:
Exports from Pakistan to China increased from US$ 685 million in 2007-08 to US$ 1.64 billion in 2010-11, thus showing an average increase of 33% per annum. The main items of Pakistan’s exports to China are cotton fabrics, cotton yarn, bed wear, surgical instruments, tent and canvas, marble, fish and its preparations and leather. Unfortunately, the variety of Pakistan’s products exported to China is very narrow. Almost around 80% of its exports consist of cotton yarn and other textile products. Export of textile and other items from Pakistan to China is given in Table-2. The FTA between Pakistan and China does not include some major value added textile categories such as woven and knitted garments. Table 2: Import of Textile Machinery from China to Pakistan
(Rs. 000) (Major Items) | Machinery | 2010-11 | 2009-10 | 2008-09 | Carding Machines | 1,273,960 | 660,418 | 88,993 | Drawing / Roving Machines | 100,653 | 10,007 | 14,914 | Blow Room Machinery | 188,202 | 39,399 | 42,886 | Machinery Preparing Textile Fibre | 199,184 | 13,972 | 197,058 | Textile Spinning Machines | 539,225 | 362,621 | 255,450 | Textile Doubling /Twist Machines | 150,323 | 157,077 | 75,867 | Weft Winding Machines | 6,682 | 9,775 | 2,607 | Cone / Bobbin Winding Machines | 14,702 | 25,485 | 14,954 | Textile Winding Machines | 44,719 | 13,521 | 57,958 | Textile Fibre Machinery | 401,324 | 113,036 | 125,080 | Weaving Machines/Power Looms | 133,425 | 35,565 | 719,60 | Weaving (Shuttleless Looms) | 423,171 | 247,477 | 31,612 | Circular Knit Machines | 27,467 | 1,978 | 17,039 | Flat Knitting Machines 165 mm | 10,307 | 14,347 | 46,393 | Embroidery Machines | 2,619,091 | 2,861,692 | 1,121,603 | Circular Knitting Machines | 321,556 | 90,008 | 71,256 | Dobbies Jacquards | 93,364 | 45,740 | 28,590 | Top and Flat Card Clothing | 160,698 | 111,912 | 73,495 | Other Card Clothing | 136,572 | 105,356 | 101,134 | Spindles Textile Machines | 275,938 | 179,627 | 2,527 | Spinning Rings | 189,986 | 194,141 | 142,540 | Reeds for Looms | 30,453 | 48,813 | 39,270 | Healds and Healds Frame | 197,056 | 157,582 | 93,322 | Shuttles | 9,667 | 5,915 | 11,068 | Parts of Weaving Machinery | 109,661 | 71,506 | 43,862 | Source: Federal Bureau of Statistics, Government of Pakistan. |
Despite this exclusion Pakistan has been able to show remarkable increase in the exports of these categories. Imports:
China has become one of the top five import sources of Pakistan. Major imports from China are machinery, chemicals, garments and other textile products, stationery products, construction materials like tiles, sanitary wares and crockery, etc. Imports from China also increased from US$ 3.03 billion in 2007-08 to US$ 4.14 billion in 2010-11, thus showing an average increase of 9% per annum. Textile machinery and electrical appliances are the major parts of overall exports.
However, amongst other reasons, one of the reasons for improvement in trade and investment from China is the Chinese government’s persuasion of its state-controlled enterprises to import Pakistani products in order to improve the trade balance and make more project specific investments. Statistics regarding the import of textile machinery from China to Pakistan is given inTable-3. The excellent political and strategic partnership between Pakistan and China has contributed in increased trade and economic cooperation, enhanced investment and mutual economic prosperity. Table 3: Export of Textile and other products from Pakistan to China (Major Items) (Value : US $000) | Item | 2010-11 | 2009-10 | Raw Cotton | 75,819 | 29,836 | Cotton Yarn | 914,594 | 634,029 | Cotton Fabrics | 137,339 | 77,474 | Knitted Fabrics | 1,264 | 87 | Ready made garments | 2,654 | 1,019 | Textile made ups | 3,359 | 1,519 | Bed wear | 16,349 | 7,422 | Tents and Canvas | 347 | -- | Synthetics textiles | 2,035 | 2,140 | Leather Tanned | 47,862 | 41,891 | Leather gloves | 158 | 128 | Sports goods | 1,177 | 1,101 | Carpet and rugs | 599 | 259 | Surgical instruments | 3,194 | 2,163 | Petroleum and its products | 18,067 | 2,037 | Fruits | 6,892 | 3,342 | Vegetables | 267 | 28 | Chemical and its products | 61,609 | 22,809 | Marble and Stone | 30,677 | 15,760 | Source : Trade Development Authority of Pakistan |

Pakistan’s exports to China represent only 0.65% market share of a range of products constituting 13% of China’s total imports. This share is very low in view of the US$ one trillion Chinese market. However it reflects the potential which exists for Pakistan’s exports to China. In the negotiations for the Phase II of FTA Pakistan should get the same preferential tariff as given to the ASEAN countries and the categories should include high value added textile products particularly readymade garments.
Kashgar Special Economic Zone (KSEZ):
It is ideally located to become a hub for trade, logistics and tourism between Pakistan and China. The development of Kashgar city was not only a positive sign for China but also for Pakistan as KSEZ provides good opportunities to Pakistani business community. The creation of KSEZ would make the city the Shenzhen of the West, providing great opportunities for the businessmen of both the countries. The success of KSEZ depends on Pakistan's stability, development and assistance. Direct air link between Kashgar and Islamabad would not only further improve bilateral relation between China and Pakistan but also economic activity would be generated.

Thar Coal Project:
Pakistan has abundant coal in Balochistan and Sindh. Studies confirm that the huge coal reserves in Thar coalfield are estimated to be 175 billion tonnes, 94 percent of the total coal reserves in the country. Thar Coal Project which has the potential to change the energy landscape of Pakistan continues to move slowly. For Thar Coal to really start and change the country's destiny, the Government of Pakistan needs to figure out how it is going to finance it. It would be a great tragedy if despite availability of huge coal resources in the country new power plants are based on imported coal. Since Chinese companies have shown interest in Thar Coal Project, Pakistan should make efforts to convince China to invest in this project. Influence of china-india trade relation on pakistan :
India and China officially resumed trade in 1978. In 1984, the two sides signed the Most Favoured Nation (MFN) Agreement. India-China bilateral trade which was as low as US$ 2.92 billion in 2000 reached US$ 51.8 billion in 2008, making China India’s largest trading partner in goods, replacing the United States of America. By the end of 2009, as a result of the world economic downturn, bilateral trade dropped to US$ 43.27 billion (a decline of 16.54%). However, in 2010 bilateral trade reached US$ 61.74 billion, a growth of 43% compared to the same period last year. India exported goods worth US$ 20.86 billion (+52%) to China and imported goods worth US$ 40.88 billion (+38%) from China, resulting in an adverse balance of trade of US$ 20 billion. In 2011, bilateral trade stood at US$ 73.9 billion (+20%). India’s total exports to China for 2011 were US$ 23.41 billion (+23%) and China’s exports to India reached US$ 50.49 billion (+24%). Trade deficit for India for year 2011 stood at US$ 27.08 billion. China’s trade with India and the world for year 2012 reflected the trends of the global economic slowdown, marked by lower consumption and slower growth in trade volumes. India-China total trade in goods for 2012 stood at US$ 66.57 billion, recording a decline of almost 10%. This decline in overall bilateral trade can be attributed to decline in both India’s exports to China (@20%) and India’s imports from China(@5%). Commodity-wise, bilateral trade was dominated by reactors, boilers, machinery, etc.; electric machinery, sound equipment, etc.; organic chemicals; ores and cotton. India’s exports to China for 2012 reached US$ 18.8 billion, recording a decline of more almost 20% y-o-y whereas imports touched a total of US$ 47.75 billion, recording a decline of more than 5% over the figure for 2011. Trade deficit for India for Jan-Oct, 2012 stood at US$ 29 billion.
The overall bilateral trade figures for year 2012 released by the China Customs are as follows: (All figures in US$ billions) | 2010 | 2011 | 2012 | Total India-China Trade | 61.74 | 73.9 | 66.57 | Growth % | 42.66 | 19.71 | -9.93 | India’s Exports to China | 20.86 | 23.41 | 18.82 | Growth % | 52.19 | 12.26 | -19.61 | China’s Exports to India | 40.88 | 50.49 | 47.75 | Growth % | 38.25 | 23.5 | -5.4 | Trade Balance for India | -20.02 | -27.08 | -28.93 | When India and China trade relation increase it will be threat for Pakistan as pakistn trade will be decreased. Pakistan-china military relation

Pakistan and China have long-standing strategic ties, dating back five decades. Pakistani President Asif Ali Zardari wrote in a recent op-ed that, "No relationship between two sovereign states is as unique and durable as that between Pakistan and China." China's partnership with Pakistan first emerged during the mid-1950s when Beijing reached out to several developing countries, and then deepened significantly during the period of Sino-Indian hostility from 1962 to the late 1980s.
Chinese policy toward Pakistan is driven primarily by its interest in countering Indian power in the region and diverting Indian military force and strategic attention away from China. South Asia expert Stephen Cohen describes China as pursuing a classic balance of power by supporting Pakistan in a relationship that mirrors the one between the U.S. and Israel. The China-Pakistan partnership serves both Chinese and Pakistani interests by presenting India with a potential two-front theater in the event of war with either country.
Chinese officials also view a certain degree of India-Pakistan tension as advancing their own strategic interests as such friction bogs India down in South Asia and interferes with New Delhi's ability to assert its global ambitions and compete with China at the international level. That said, Beijing has demonstrated in recent years that it favors bilateral Indo-Pakistani negotiations to resolve their differences and has played a helpful role in preventing the outbreak of full-scale war between the two countries, especially during the 1999 Indo-Pakistani border conflict in the height of kargil war .
China and Pakistan defense ties
China is Pakistan's largest defense supplier. China transferred equipment and technology and provided scientific expertise to Pakistan's nuclear weapons and ballistic missile programs throughout the 1980s and 1990s, enhancing Pakistan's strength in the South Asian strategic balance. The most significant development in China-Pakistan military cooperation occurred in 1992 when China supplied Pakistan with 34 short-range ballistic M-11 missiles. Recent sales of conventional weapons to Pakistan include JF-17 aircraft, JF-17 production facilities, F-22P frigates with helicopters, K-8 jet trainers, T-85 tanks, F-7 aircraft, small arms, and ammunition.Beijing also built a turnkey ballistic-missile manufacturing facility near the city of Rawalpindi and helped Pakistan develop the 750-km-range, solid-fueled Shaheen-1 ballistic missile.While the U.S. has sanctioned Pakistan in the past--in 1965 and again in 1990--China has consistently supported Pakistan's military modernization effort.
China has helped Pakistan build two nuclear reactors at the Chasma site in the Punjab Province and continues to support Pakistan's nuclear program, although it has been sensitive to international condemnation of the A. Q. Khan affair and has calibrated its nuclear assistance to Pakistan accordingly. During Pakistani President Zardari's visit to Beijing in mid-October 2008, Beijing pledged to help Pakistan construct two new nuclear power plants at Chasma, but did not propose or agree to a major China-Pakistan nuclear deal akin to the U.S.-India civil nuclear agreement. U.S. congressional Members have expressed concern about China's failure to apply Nuclear Suppliers Group (NSG) "full-scope safeguards" to its nuclear projects in Pakistan.
China also is helping Pakistan develop a deep-sea port at the naval base at Gwadar in Pakistan's province of Baluchistan on the Arabian Sea. The port would allow China to secure oil and gas supplies from the Persian Gulf and project power in the Indian Ocean. China financed 80 percent of the $250 million for completion of the first phase of the project and reportedly is funding most of the second phase of the project as well. The complex will provide a port, warehouses, and industrial facilities for more than 20 countries and will eventually have the capability to receive oil tankers with a capacity of 200,000 tons. There is concern that China may turn its investment in Gwadar Port into access for its warships.

The Indian influence in military relations:
China has been able to successfully pursue closer relations with India, especially on the economic front (bilateral trade rose from $5 billion to $40 billion in the course of five years), while continuing to pursue strong military and strategic ties to Pakistan.
China's interest in improving ties to India over the last decade has spurred Beijing to develop a more neutral position on the Kashmir issue, rather than reflexively taking Pakistan's side, which has traditionally meant supporting United Nations resolutions calling for a plebiscite or backing Pakistan's attempts to wrest the region by force, as with Pakistan's 1965 Operation Gibraltar.A turning point in China's position on Kashmir came during the 1999 Kargil crisis when Beijing helped convince Pakistan to withdraw forces from the Indian side of the Line of Control following its incursion into the Kargil region of Jammu and Kashmir. Beijing made clear its position that the two sides should resolve the Kashmir conflict through bilateral negotiations, not military force. India was pleased with China's stance on the Kargil crisis, which allowed Beijing and New Delhi to overcome tensions in their relations that had developed over India's 1998 nuclear tests.
Despite the evolution in the Chinese position on Kashmir, China continues to maintain a robust defense relationship with Pakistan, and to view a strong partnership with Pakistan as a useful way to contain Indian power. China's attempt to scuttle the U.S.-India civil nuclear agreement at the September 2008 Nuclear Suppliers Group (NSG) meeting was evidence for many Indians that China does not willingly accept India's rise on the world stage. The Chinese--buoyed by the unexpected opposition from NSG nations like New Zealand, Austria, and Ireland--threatened the agreement with delaying tactics and last-minute concerns signaled through an article in the Chinese Communist Party's English-language paper, The People's Daily. The public rebuke of the deal followed several earlier assurances from Chinese leaders that Beijing would not block consensus at the NSG.
Indian observers claim the Chinese tried to walk out of the NSG meetings in order to prevent a consensus, but that last-minute interventions from senior U.S. and Indian officials convinced them that the price of scuttling the deal would be too high, forcing them to return to the meeting. Indian strategic affairs analyst Uday Bhaskar attributed the Chinese maneuvering to longstanding competition between the two Asian rivals. "Clearly, until now China has been the major power in Asia," said Bhaskar. "With India entering the NSG, a new strategic equation has been introduced into Asia and this clearly has caused disquiet to China." Indian official Palaniappan Chidambaram (now Home Minister), citing China's position within the NSG, said that, "From time to time, China takes unpredictable positions that raise a number of questions about its attitude toward the rise of India."

GEO-STRATEGIC IMPORTANCE OF PAKISTAN

Geo strategic means the importance of a country or a region as by virtue of its geographical location. Geo political is defined as, stressing the influence of geographic factors on the state power, international conduct and advantages it derives from its location. Stephen Cohn describes the importance
“While history has been unkind to Pakistan, its geography has been its greatest benefit.”
Location of Gwadar port:
Gwadar Port is a deep-sea warm water port situated on the Arabian Sea at Gwadar in Balochistan province of Pakistan.It is about 533Km from Karachi and 120Km from Iranian border.Gwadar port is located at the mouth of the Persian Gulf and outside the Strait of Hormuz.
CONSTRUCTION OF GWADAR PORT:
The construction contract was awarded to a Chinese firm and construction began on 22 March 2002 and Phase I of the Port was completed in December 2006, 75% of the cost was paid by china, and inaugurated by the , on 2 March 2007.The construction at Gwadar was realized with the help of heavy Chinese investment. The total cost of the development of this deep sea port lies is estimated at US $1.16 billion, while its first Phase I cost US $248 million. The government of Pakistan government provided US $50 million, while China supplemented the rest in the form of grants (US $49 million), loans (US $89 million) and buyer’s credit (US $60 million). China also invested US $200 million in the coastal highway linking Gwadar to Karachi
GEO-STRATEGIC SIGNIFICANCE OF GWADAR
Gwadar’s geographical location gives it great strategic, military and economic importance.
It lies approximately 400 km from the Strait of Hormuz, the crucial point through which the Gulf region transports 17 million tons of crude oil to the world every day. It acts as a natural port for the land-locked and energy rich Central Asian States, as well as for Afghanistan

CHINA’S INTERESTS:
Gwadar has strategic importance for China as around 60% of its crude oil comes from Gulf countries that are close to Gwadar it provides the shortest overland route to the waters in the south for China’s rapidly developing Xinjiang province. Being the closest point of access to the shipping lanes of the Arabian Sea it is ideally positioned to act as the major trans-shipment hub of the area. Xinjiang Province lies 4,500 kilometers from China’s east coast but just 2,500 kilometers from Gwadar. This will make it possible for China to route some of its external trade through the Gwadar port.
Direct access to the India Ocean, with Gwadar, would give China a strategic post of observation and a key location for its navy.
PORT OPERATIONS:
Pakistan handed the operations of the port over to China Overseas Port Holding Company (COPHC) on 18th feb,2013.
Earlier, the contract was given to the Port of Singapore Authority (PSA.)

INDIAN CONCERNS:
Gwadar will allow China to "monitor Indian activity in the Arabian Sea and future US-Indian maritime cooperation in the Indian Ocean. it is seen as a part of a Chinese "string of pearls" strategy aimed at encircling India.
China has a heavy stake in the energy route in the Indian Ocean, which India and other countries are also keen to exploit.

Pakistan’s decision to handover strategic Gwadar port to China is a matter of “serious concern” for India, Defence Minister A.K. Antony. AK Antony told reporters in Bangalore where he inaugurated the Indian air show. “My answer is very straightforward and simple”
(tribune.com.pk)
February 6, 2013
“It will enable (China) to deploy military capability in the region,” said Jay Ranade, of the Centre for Air Power Studies and a former additional secretary at the government of India. “Having control of Gwadar, China is basically getting an entry into the Arabian Sea and the Gulf.”(Feb 7,2013 THE NEWS)

.
The port of Chabahar in the southwest corner of Iran, which India is hoping will win it access to Central Asia and Afghanistan, is barely 72km (44 mile) from Pakistan’s deep-water Gwadar port which China has built to secure its energy supplies.
In a strategically significant move to counter China's presence in the region, India has announced that it will upgrade Iran's crucial Chabahar port that gives a transit route to land-locked Afghanistan
“We are going ahead with the Chabahar project. Cabinet has already cleared it", external affairs minister Salman Khurshid, who held a series of meeting with Iranian leadership said here.”
Following up on the decision, a high-level delegation headed by union shipping secretary will be visiting Tehran to fine-tune the plans. India initially plans to invest $100 million.
(Hindustan times) 5th may,2013

The balancing act:

Despite increased cooperation between the United States and Pakistan since 2001, Islamabad places greater value on its relationship with Beijing. “Pakistan thinks that both China and the United States are crucial for it,” said Mr. Haqqani. “If push comes to shove, it would probably choose China—but for this moment, it doesn’t look like there has to be a choice.” Pakistan considers China a more reliable ally than the United States, citing years of diplomatic manipulation and neglect on the part of Washington. As this interactive timeline explains, Pakistan and China grew closer in1960s as Washington and Islamabad began to part ways over the handling of regional issues. In particular, Pakistan felt betrayed when Washington cut off aid to Islamabad during its 1965 and 1971 wars with India. Pakistan played a pivotal role as an intermediary during the U.S-China rapprochement in the early 1970s, but Pakistanis were still stung by what they see as U.S. indifference toward their country after using it to funnel aid to the Afghan mujahedeen to fight the Soviets in Afghanistan.
The India-U.S. civilian 123 agreement compounds Pakistan’s distrust of the United States spurring efforts by Pakistani officials to secure a similar deal with China. Pakistan had earlier requested a civil nuclear cooperation deal with the United States, but Washington refused
Meanwhile, China is concerned over the increasing level of extremism inside Pakistan. Some experts say China is also concerned about Chinese Uighur separatists in the western province of Xingjian finding a safe haven in Pakistan’s tribal areas. According to some analysis, Uighur militants were enrolled in Pakistani madrassas during the 1980s and fought the Soviets alongside the Taliban and against the U.S.-led coalition in Afghanistan. Some of these madrassas provided an important site for the recruitment of Uighur fighters who later returned to Xinjiang.
China has also publicly expressed concern over the increased level of kidnappings and killing of Chinese citizens by Pakistani militants. China’s ambassador in Islamabad urged Pakistan to “take effective measures to protect all the Chinese in Pakistan” after militants shot and killed three Chinese nationals in July 2007. Militants continue to target Chinese workers in Balochistan

Regional Cooperation:

All countries in the region are reevaluating their traditional positions. China has taken a more neutral position on India-Pakistan issues as Kashmir in the past decade and a half, and has begun to take the relationship with India more seriously.
Pakistan is also not the only South Asian nation China is interested in strengthening ties with: Beijing has expanded its relation with Myanmar, Nepal, Sri Lanka, Bangladesh, Bhutan, and the Maldives. Any confrontation between India and Pakistan is not in China’s interests and put Beijing in the position of having to choose between the two countries and draw the United States further into the region. “In this sense,” writes Kronstadt, “peace between India and Pakistan is in China’s interest.”
According to Goldman Sachs, China is going to emerge as a second largest economy in the world by 2035. Its foreign reserves exceed $ 2 trillion. China with a population of 1.3 billion may be the ideal consumer market for Pakistani products. China is leading source of investment in Pakistan. China and Pakistan both oppose terrorism, extremism, and separation. Both countries cooperate in the areas of economy, defense, science and technology, and people-to-people contact. Both countries also cooperate in mineral and energy as well as in communicate and banking sector.
Pak-China relationship is the corner stone of our foreign policy. Pakistan upholds the One-China policy and considers Taiwan to be a part of Pakistan.
China has showed interest to invest in Pakistan in diverse fields including trade, industry, financial services, banking, energy, construction, real estate, and tourism etc.
It is expected that agreements on buying equipment from China can also help offset dependence on the US. Pakistan is located at the confluence of South Asia, Central Asia and the Middle East nd a vast coastline provides a trade and energy corridor to many regional countries and China can take the lead in this respect for mutual benefits. Nuclear cooperation:

The Chashma nuclear power plant near Chashma, Punjab, Pakistan, consists of Chashma Nuclear Power Plant 1 ( CHASNUPP-1) and Chashma Nuclear Power Plant 2 (CHASUNUPP-2 ; 300MW) and CHASNUPP-4 (340 MW) are in the planning stages. Chashma Nuclear Power Plant’s reactors and other facilities are being built and operated by the Pakistani government with Chinese support. Chashma Nuclear Power Plant 1 is located at kundian, Punjab, Pakistan. CHASNUPP-1 is the only reactor presently operating at the chashma nuclear complex. CHASNUPP-1 is a single reactor unit. the unit is of 300MW capacity. Construction started in 1993 and the plant came into operation in 2000.
Major completed projects:

* The Karakorum highway (1978) * Chashma-I nuclear power plant (1999) * The machine tool factory * the first phase of the Gawadar port * heavy mechanical complex, taxila projects underway:

* chashma-2 nuclear power plant * the second phase of the Gawadar port * the saindak copper mines, Balochistan * the Gomal zam dam * several oil and gas exploration schemes

Some current issues:

22 Mar 2013 (dawn.com)
China and Pakistan reached a formal agreement last month to construct a third nuclear reactor in the northern province of Punjab that the Obama administration says will violate Beijing’s promises under an international anti-nuclear weapons accord.

The secret agreement for the Chashma 3 reactor was signed in Beijing during a visit by a delegation from the Pakistan Atomic Energy Commission from Feb. 15 to 18, according to U.S. intelligence and diplomatic officials quoted by Washington Times

The agreement calls for the state-run China National Nuclear Corp. to construct a 1,000 megawatt power plant at Chashma, where two earlier Chinese reactors were built.
25 MAY 2013 (dawn.com) Chinese Ambassador to Pakistan, Liu Jian, vowing to strengthen Pak-China ties further in all fields said on Wednesday that China has been cooperating with the international community and regional partners to ensure peace, progress and prosperity in the region and the world.
Addressing a function at the inauguration of "China Hall" here at Strategic Studies Institute Islamabad (SSII), a newly formed think tank, the Chinese envoy said that Pakistan and China have very strong strategic and long-term relations.
He said both the countries always extended their support to each other on all-important issues. He said China will always stand by Pakistan.
The Indian question:

China and Pakistan have traditionally valued one another as a strategic hedge against India. According to the current Pakistani ambassador to the United States Hussain Haqqani. “for China, Pakistan is a low-cost secondary deterrent to India, for Pakistan, China is a high-valued guarantor of security against India.”
Mutual enmity between India and Pakistan dates to partition in August 1947, when Britian relinquished its claim over the Indian subcontinent and divided its former colony into two states. Since then Pakistan and India have fought three wars and a number of low-level conflicts. Tensions still remain high over the disputed territory of Kashmir.
India has long been perturbed by China’s military. Alan Kronstatd ,a specialist in South Asian affairs writes that observers in India see Chinese support for Pakistan as “a key aspect of Beijing’s perceived policy of ‘encirclement’ or constraint of India as a means of preventing or delaying New Delhi’s ability to challenge Beijing’s region-wide influence “China India fought a border war in1962.and both still claim the other is occupying large portions of territory. The 1962 Sino-Indian border conflict was a watershed moment for the region.

Conclusion:

China and Pakistan historically have enjoyed long standing, versatile and cordial relations. From the very beginning, in 1955, when the then Prime Minister Chaudary Muhammad Ali and his Chinese counterpart Zhou Enlai consolidated their support on mutual understanding, the relationship between the two countries have remained ‘tested by adversity’.
Pakistan was a key ally for China throughout the Cold War period in coping with India and the Soviet Union until the Gorbachev and Beijing reached and acceded to certain demands. However, many advantages were also accrued to Pakistan as a result of its alliance with a more culturally diverse, communist country like China. It furthered Pakistan’s security, rendered Pakistan weaponry in the 1965 war with India and China adopted a pro-Pakistan stance on the Kashmir dispute.
However with the dawn of the current century, China’s relations with India and Russia have undergone a dramatic shift in strategic partnership from enmity to entente. In the case of Pakistan and India, the uncertain triangle of China-Pakistan-India has historically been constructed around the lines that the dilution of China’s relations with one country provides an impetus to China’s improvement in relations with other country. China today being a major power sees the world through the prism of its global interests. Unlike the Cold War standoff, one cannot argue that its rapprochement with India will affect China’s relationship with Pakistan because of the gravity of China’s interests in Pakistan.

Bibliography:

* http://www.tdap.gov.pk/china_tab.php * http://www.brecorder.com/supplements/88/1188549/ * federal bureau of statistics, government of Pakistan * trade development authority of Pakistan * http://tribune.com.pk * http://www.thehindu.com * CHINA AND PAKISTAN diplomacy of an ethentec cordial by Anwar Hussain Syed * CHINA AND PAKISTAN analysis of mutual relationship by Raul Bux rais