China Eyes Pakistan Industry – What’s More in Store?

China’s relationship with Pakistan seems to be getting deeper as several corporate firms from Beijing are in negotiations to acquire more businesses and property in Pakistan after securing two major deals in recent months.

A Reuters report released last week cites a dozen executives from some of Pakistan’s largest firms claiming that Chinese companies were looking mainly at the cement, steel, energy and textile sectors, which make the backbone of Pakistan’s $270 billion economy.

Many analysts opined that this trend shows that Chinese companies are using Beijing’s “One Belt, One Road” project – a global trade network of which Pakistan is a key part – to help expand abroad at a time when growth has slowed at home.

A Beijing-led consortium took a strategic stake in the Pakistan Stock Exchange, and Shanghai Electric Power Board has acquired one of Pakistan’s biggest energy producers, K-Electric, for $1.8 billion — according to the report.

Muhammad Ali Tabba, the CEO of two companies in the Yunus Brothers Group cement-to-chemicals conglomerate, told Reuters:

“The Chinese have got deep pockets and they are looking for major investment in Pakistan.”

Tabba said Yunus Brothers, teaming up with a Chinese company, lost out in the battle for K-Electric, but the group is eyeing up other joint ventures as part of a $2 billion expansion plan over the coming years.

Mohammad Zubair, Pakistan’s Privatization Minister, told Reuters:

“China’s steel giant Baosteel Group is in talks over a 30-year lease for state-run Pakistan Steel Mills,”

The negotiations come as Pakistani business situation improves, with companies betting that China’s investment on road, rail and energy infrastructure under the China-Pakistan Economic Corridor (CPEC) will boost the country’s economy.

It is welcomed by many in Pakistan and viewed as a sign of economic development: the increase in foreign direct investment to $1.9 billion in 2015-16, from earlier peak of $5.4 billion in 2007-08.

At the stock exchange signing ceremony, Sun Weidong, China’s ambassador to Pakistan, said the deal “embodies the ongoing financial integration” between Chinese and Pakistani markets.

“This will facilitate more financial support for our enterprises,” Sun maintained.

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