Mar 26 - Apr 1, 20

A Chinese business delegation led by Li Yan, Chairman of Asia Investment Houtang, met with President Asif Ali Zardari in Islamabad this month, and expressed interest in the development of Special Economic Zone (SEZ) in the proposed coastal city of Zulfiqarabad in Thatha district Sindh province. The SEZ proposed by the Chinese last year, will house leading investors and industrialists from China to undertake mega developmental projects in the new city project. A significant feature of the project is that the Chinese would invest and reinvest for 15 years in the proposed city before taking out profits. Suolang Duoji - a Chinese businessman also known under the name of Li Yan - has been ambitious to take full advantage of a Pakistan-China free trade agreement (FTA) signed in 2006, as the strategically located Pakistan with liberal incentives, low cost labor and access to the huge markets in the region, offers unique opportunity to Chinese investors. Yan or Suolang has been visiting the country with different Chinese delegations with a new identity since 2009.

During meeting with Li Yan, President Zardari appreciated the Chinese interest in the development of SEZs in the proposed city project and assured him of providing all possible assistance and facilitation to the Chinese companies and investors especially in the petrochemicals and other areas especially those that do not exist in the country at present.

Yan's delegation included among others China Petrochemical Corporation DG Chen Qi, HOPU Investment Chairman Fang Fenglei and Professor Tang.

The development program of Zulfiqarabad city is spreading over on 15 years. Initially, the industrialists and investors from China would be brought in to initiate the developmental activities, which would subsequently be followed by investors from other countries. The proposed economic zone would not be confined to industrial and economic activities but cover the entire range of activities in a modern metropolis.

The two countries have facilitated integration of their economies for mutual benefit by signing FTA covering goods, investment and services. China's investment in the country has expanded from resources, home appliances to communications and finance. Ambitious Chinese businessmen like Suolang have got the opportunity to expand their empire in the south Asian country.

Yan or Suolang is the chairman of Asia International Finance Company Limited (AFIC), a leading Chinese business group, which has invested $40 million in KASB Finance Limited. He is also the chairman and 20 per cent owner of Hong Kong-listed Lumena Resources Corp, which signed a memorandum of understanding (MoU) with KASB Group in December 2009 to promote China industrial zone in the country.

The $40 million investment by AFIC is part of its long-term commitment to investing in Pakistan and a first step in an envisaged long-term strategic relationship with the KASB Group.

In 2010, the same Suolang or Li Yan as the Chairman Tnegzhong Group signed a MoU with Punjab provincial government under which the Chinese company agreed to set up an economic zone to promote industrial activities in the province. He also proposed to set up Pak-China Economic and Technological Development Zone, Real Estate Economic Zone and Tourist Economic Zone near Lahore in Punjab.

Last year, Yan visited Karachi Stock Exchange (KSE), Pakistan's main stock market and discussed matters related to Chinese direct investment in Pakistan and overall development of capital markets of the two countries.

China is also a major investor in Pakistan though foreign investment in the country has witnessed a steady decline over the past few years. Presently, many Chinese firms are interested in making investments and establishing joint ventures with local companies.

In December 2011, the two countries signed a landmark currency swap agreement on the occasion of visit by a high-powered delegation from China headed by Di Bingguo, China's state councilor to Islamabad. The currency swap agreement will last for three years and can be extended by mutual consent. Under the deal signed between State Bank of Pakistan (SBP) and Peoples Bank of China (PBC), China agreed to swap 10 billion Yuan ($1.6 billion) for 140 billion Pakistani rupees.

Last year, the Chinese banking giant, Industrial and Commercial Bank of China (ICBC) started its operations in Pakistan by opening its branches in Karachi and Islamabad. Presence of a Chinese bank in Pakistan will provide financial support to Chinese companies, which are exploring investment opportunities or engaged in infrastructure development and financial business in the country.

The entry of ICBC, the world's biggest bank by market value, into the country's financial market is immensely important at a time when the western financial institutions are scaling back their presence in the south Asian country. On the other hand, Chinese investments and projects in the south Asian country reached to $25 billion. China's public and private sector is currently involved in over 250 projects in Pakistan from mega to minor and from strategic to ordinary businesses.

A direct financial link was necessary in view of growing trade relation between the two states. Bilateral trade reached $5.789 billion in the fiscal year 2010-11, with import from China rose to $4.144 billion but export to China remained at $1.645 billion. The existing investment and trade relation between the two countries is expected to further enhance with the presence of ICBC in Pakistan.

With the opening of direct financial link, the bilateral trade volume is expected to improve at a time when the balance of trade is heavily against Pakistan. Local traders however believe that the country needs to bring down the cost of production since China is the market of low-cost products.

Pakistan, the second largest trading partner of China in South Asia, has requested China to give unilateral tariff concessions to 268 Pakistani product lines. The country has also proposed to China for the development of an efficient Electronic Data Interchange (EDI) to realize the full potential of the FTA. Pakistan needs a jump-start to enhance the trade volume and diversify its exports to China and other countries. It would be a colossal job for the Pakistani exporters to bridge the wide gap, which would not be possible without the help of the Chinese.

The total volume of bilateral trade rose from $2 billion in 2006 to $8.7 billion in 2010. Islamabad and Beijing have resolved to increase their trade to $15 billion in the shortest possible time. Official figures reveal that Pak-China bilateral trade registered an overall growth of 28 per cent in 2010 to reach the $8.7 billion as compared to $6.7 billion in 2009.