Analyzing CPEC

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Falijee
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Re: Analyzing CPEC

Post by Falijee »

Process Of CPEC ( Colonizing Pakistan To Enrich China ) Begins :mrgreen:

Gwadar: 4 factories to start production by December-2017
China has already invested USD 50 million in free-trade zone at Gwadar. At least 300 Chinese engineers ( where are they housed and fed ) and subordinate staff have arrived in last six months.
Nawaz-led federal government is beefing up efforts to start production activities in at least four factories by December-2017. Officials told that over 300 Chinese ships had docked at port since 2008 but a lot was needed to be done if Gwadar wanted to emerge as multi-dimensional and multi-purpose port of region.Four factories would start production by December 2017. Among these four conglomerate, one is Pakistani auto-mobile company which has already established strong footholds in Chinese market.
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Re: Analyzing CPEC

Post by anupmisra »

Falijee wrote:Process Of CPEC ( Colonizing Pakistan To Enrich China ) Begins :mrgreen:

Gwadar: 4 factories to start production by December-2017
At least 300 Chinese engineers and subordinate staff have arrived in last six months.
The article does not mention the number of paki low end service workers (euphemistically termed as subordinate staff) that will be needed to make the life of these 300 chini engineers and comfort workers safe, home-like and memorable. I wonder which paki automobile "company" has a foothold in the land of the cunning chinis?

The process of "heads I wind, tails you lose" has begun. Long live the iron brotherhood.
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Re: Analyzing CPEC

Post by anupmisra »

The only "auto company" setting up shop in 'Gawahdar" is this chini state owned enterprise - JAC Motors. It produces low end cars with robots.
For creating this kind of cars, the company takes the assistance of the robots as well.
The said company has the plan for establishing a facility in Gwadar, Pakistan for producing the cheap cars in the country.
https://www.morenews.pk/chinese-company ... heap-cars/
chola
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Re: Analyzing CPEC

Post by chola »

My hat's off to the chinis if they could get the pakis to produce anything exportable.

Most likely these are for the paki and surrounding islamic markets.
ranjan.rao
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Re: Analyzing CPEC

Post by ranjan.rao »

chola wrote:My hat's off to the chinis if they could get the pakis to produce anything exportable.

Most likely these are for the paki and surrounding islamic markets.
missing out on the endless supply of AK47s, IEDs and not to forget teh Jihadis
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Re: Analyzing CPEC

Post by komal »

ranjan.rao wrote:
chola wrote:My hat's off to the chinis if they could get the pakis to produce anything exportable.
Polio.
kapilrdave
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Re: Analyzing CPEC

Post by kapilrdave »

China will be proved as the biggest fool by treading into the territory where wise don't even go to pee. Bak has got nothing to lose. Nanga doesn't bath nor does he wring.

Also, what will they do when India snatches back POK? This is nothing but The Great Chinese Wall of 21st century. Useless.
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Analyzing CPEC

Post by Peregrine »

Mystery of CPEC payments

The latest quarterly report by the State Bank of Pakistan points out an intriguing development regarding the payments connected with CPEC projects. This year, the gap between import recorded by the Pakistan Bureau of Statistics (PBS) and the State Bank has widened to a historic high. The report says that over a 10-year period, this gap has been an average of $1.6 billion, but this year it climbed to $3bn.

There are good reasons why there should be a gap between the figures reported by the PBS and those reported by the State Bank. The PBS uses customs data, where goods landing at the port are valued by the customs authorities before being assessed for duty, while the State Bank uses banking data, where banks report how much they have paid for imports through letters of credit.

Often goods that land at the port have been paid through means other than a banking channel, or in some cases they are paid under a deferred payment plan, so the goods arrive and their value is registered as an import by customs, but the payment is sent much later through banks.

But there are no good reasons as to why this discrepancy should be so large, and why this massive gap should materialise so suddenly in the first half of the current fiscal year. A closer look shows some interesting developments. Here is what the report says: “a large share of this discrepancy can be explained by the surge in import of power generation machinery, which is being recorded by customs but is not fully visible in import financing data available with SBP. The gap in import data for power generation equipment also widened dramatically to US$ 1.1bn in H1-FY17, from the previous 10-year’s average of just US$ 193 million. Since most power sector activity in the country is taking place under the CPEC umbrella, it is highly probable that the widening gap between the two import datasets is linked with the CPEC”.

So it appears that power-generation machinery is landing at the port but the corresponding outgoing payments for this machinery cannot be seen. Either the payments will be due much later, or the companies responsible for the projects are simply making the payments directly in China, after taking a loan from a Chinese bank. This is how the report puts it: “Typically, banks report import financing data to SBP after importers make payments against L/Cs. However, that appears not to be the case with imports of power generation machinery over the past two and a half years: there has been a relatively minor increase in these imports based on L/C-level data provided by commercial banks to SBP. Hence, it appears that the bulk of these machinery imports are being financed from outside the Pakistani banking channel.”

Translation: we’re not sure what’s going on. How are we seeing large-scale imports landing at the port, but not seeing any payment going out for them? If the settlement is being made “outside the Pakistani banking channel”, what does that imply for the “investments” we were supposed to see from China? Surely the outflows on debt servicing will go from the Pakistani channel, but the inflows are not being routed through it.

“This difference indicates that capital equipment imports into the country, FDI and loans from China are not being fully captured in BoP data,” says the report. So our balance-of payments accounts is now way off, and we have an ever-diminishing idea of how much is coming and going. But what happens once these projects begin commercial operations and their debts and repatriation of dividends gets going? Will that bill arrive with a bang?

Connected to this is another intriguing development: the level of Chinese foreign direct investment coming into the country appears to have fallen, even as the project’s implementation is gathering pace and large-scale machinery imports are getting going. Inflows from China as direct investment actually dropped this year by 54 per cent compared to last year, with the bulk of this decline in the power sector.

So how come the power sector is seeing massive amounts of Chinese activity, with projects gathering speed and momentum and large amounts of machinery landing at the port, while imports and investment from China are either stagnant or declining sharply? Connected with this is the fact that loans from China are rising, particularly for balance-of-payments support. In the first half of the fiscal year, the government has received $848m in loans from a Chinese bank, presumably as balance-of-payments support to help pay for whatever Chinese imports are coming, for which payments are being sent through the Pakistani banking system.

Given the massive scale of the funds involved, the State Bank is right to feel a little puzzled as to why the banking system has not felt the stress from these payments. For now, we can rejoice that material is landing in the country seemingly for free, but project documents make clear that these are commercial projects, so it should be equally clear that soon outflows will begin to pay their cost. So if the stress hasn’t manifested itself yet, that could mean it will arrive later, in magnified form, because we will have to pay not only for the equipment, but interest on top.

This is further evidence that we do not fully know how CPEC is really going to work once it gets going. If the government knew that this is how the procurement would work, it would have been a good idea to inform the State Bank in advance so they would not be taken by surprise in December of this year and have to launch a rather large reconciliation exercise. And if they didn’t know that this is how things were going to work, then one can only wonder what else they don’t know about these deals.

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Re: Analyzing CPEC

Post by kit »

Peregrine wrote:Mystery of CPEC payments

The latest quarterly report by the State Bank of Pakistan points out an intriguing development regarding the payments connected with CPEC projects. This year, the gap between import recorded by the Pakistan Bureau of Statistics (PBS) and the State Bank has widened to a historic high. The report says that over a 10-year period, this gap has been an average of $1.6 billion, but this year it climbed to $3bn.

There are good reasons why there should be a gap between the figures reported by the PBS and those reported by the State Bank. The PBS uses customs data, where goods landing at the port are valued by the customs authorities before being assessed for duty, while the State Bank uses banking data, where banks report how much they have paid for imports through letters of credit.

Often goods that land at the port have been paid through means other than a banking channel, or in some cases they are paid under a deferred payment plan, so the goods arrive and their value is registered as an import by customs, but the payment is sent much later through banks.

But there are no good reasons as to why this discrepancy should be so large, and why this massive gap should materialise so suddenly in the first half of the current fiscal year. A closer look shows some interesting developments. Here is what the report says: “a large share of this discrepancy can be explained by the surge in import of power generation machinery, which is being recorded by customs but is not fully visible in import financing data available with SBP. The gap in import data for power generation equipment also widened dramatically to US$ 1.1bn in H1-FY17, from the previous 10-year’s average of just US$ 193 million. Since most power sector activity in the country is taking place under the CPEC umbrella, it is highly probable that the widening gap between the two import datasets is linked with the CPEC”.

So it appears that power-generation machinery is landing at the port but the corresponding outgoing payments for this machinery cannot be seen. Either the payments will be due much later, or the companies responsible for the projects are simply making the payments directly in China, after taking a loan from a Chinese bank. This is how the report puts it: “Typically, banks report import financing data to SBP after importers make payments against L/Cs. However, that appears not to be the case with imports of power generation machinery over the past two and a half years: there has been a relatively minor increase in these imports based on L/C-level data provided by commercial banks to SBP. Hence, it appears that the bulk of these machinery imports are being financed from outside the Pakistani banking channel.”

Translation: we’re not sure what’s going on. How are we seeing large-scale imports landing at the port, but not seeing any payment going out for them? If the settlement is being made “outside the Pakistani banking channel”, what does that imply for the “investments” we were supposed to see from China? Surely the outflows on debt servicing will go from the Pakistani channel, but the inflows are not being routed through it.

“This difference indicates that capital equipment imports into the country, FDI and loans from China are not being fully captured in BoP data,” says the report. So our balance-of payments accounts is now way off, and we have an ever-diminishing idea of how much is coming and going. But what happens once these projects begin commercial operations and their debts and repatriation of dividends gets going? Will that bill arrive with a bang?

Connected to this is another intriguing development: the level of Chinese foreign direct investment coming into the country appears to have fallen, even as the project’s implementation is gathering pace and large-scale machinery imports are getting going. Inflows from China as direct investment actually dropped this year by 54 per cent compared to last year, with the bulk of this decline in the power sector.

So how come the power sector is seeing massive amounts of Chinese activity, with projects gathering speed and momentum and large amounts of machinery landing at the port, while imports and investment from China are either stagnant or declining sharply? Connected with this is the fact that loans from China are rising, particularly for balance-of-payments support. In the first half of the fiscal year, the government has received $848m in loans from a Chinese bank, presumably as balance-of-payments support to help pay for whatever Chinese imports are coming, for which payments are being sent through the Pakistani banking system.

Given the massive scale of the funds involved, the State Bank is right to feel a little puzzled as to why the banking system has not felt the stress from these payments. For now, we can rejoice that material is landing in the country seemingly for free, but project documents make clear that these are commercial projects, so it should be equally clear that soon outflows will begin to pay their cost. So if the stress hasn’t manifested itself yet, that could mean it will arrive later, in magnified form, because we will have to pay not only for the equipment, but interest on top.

This is further evidence that we do not fully know how CPEC is really going to work once it gets going. If the government knew that this is how the procurement would work, it would have been a good idea to inform the State Bank in advance so they would not be taken by surprise in December of this year and have to launch a rather large reconciliation exercise. And if they didn’t know that this is how things were going to work, then one can only wonder what else they don’t know about these deals.

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well maybe CPEC is not really a part of Pakistan :mrgreen:
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Re: Analyzing CPEC

Post by SSridhar »

Think outside the box - Edit, DT
China has been happy to comply, promising to effectively bail Pakistan out of its water insecurity by including all Indus projects under the CPEC umbrella. This has worked out well for both sides. Pakistan will not have to put itself out to dry quite so much. And Beijing will make money on the returns. For Pakistan is signed up to pay a total of $90 billion against CPEC loans, which amounts to a 40 percent profit approximately.
We are getting to see new numbers every day, especially the Chinese profit margins !
kit
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Re: Analyzing CPEC

Post by kit »

after all the billions of chinese money what if pakis go and default on their loans ?? .. just take ove the cpec ?? .. there are no permanent friends in geopolitics btw
kit
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Re: Analyzing CPEC

Post by kit »

oh wait .. isnt that why the chinese marines are stationed there :mrgreen: ..and the navy too
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Re: Analyzing CPEC

Post by jagga »

kit wrote:after all the billions of chinese money what if pakis go and default on their loans ?? .. just take ove the cpec ?? .. there are no permanent friends in geopolitics btw
I feel it's not if but they will. That would mean that Paki's got shiny roads and other infrastructure for free! I am not a Arthsashtri, but seems like Paki's would get great infrastructure 'potentially' for free and which in turn may boost there economy. Not sure what makes Chinese to risk such a big investment in a failed state like Pakistan. There is good chance that Paki's will default and also risk (in Chini eyes) of India taking POK back.
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Re: Analyzing CPEC

Post by chetak »

jagga wrote:
kit wrote:after all the billions of chinese money what if pakis go and default on their loans ?? .. just take ove the cpec ?? .. there are no permanent friends in geopolitics btw
I feel it's not if but they will. That would mean that Paki's got shiny roads and other infrastructure for free! I am not a Arthsashtri, but seems like Paki's would get great infrastructure 'potentially' for free and which in turn may boost there economy. Not sure what makes Chinese to risk such a big investment in a failed state like Pakistan. There is good chance that Paki's will default and also risk (in Chini eyes) of India taking POK back.
most of the han "investment" is in the form of loans with usurious interest rates and a paki sovereign guaranteed very high ROI to the hans.

what's free is only the paki backsides that the hans can take at will.
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Re: Analyzing CPEC

Post by Prem »

https://www.dawn.com/news/1325124/myste ... c-payments
Mystery of CPEC payments
The report says that over a 10-year period, this gap has been an average of $1.6 billion, but this year it climbed to $3bn.
There are good reasons why there should be a gap between the figures reported by the PBS and those reported by the State Bank. The PBS uses customs data, where goods landing at the port are valued by the customs authorities before being assessed for duty, while the State Bank uses banking data, where banks report how much they have paid for imports through letters of credit.Often goods that land at the port have been paid through means other than a banking channel, or in some cases they are paid under a deferred payment plan, so the goods arrive and their value is registered as an import by customs, but the payment is sent much later through banks.But there are no good reasons as to why this discrepancy should be so large, and why this massive gap should materialise so suddenly in the first half of the current fiscal year. A closer look shows some interesting developments. Here is what the report says: “a large share of this discrepancy can be explained by the surge in import of power generation machinery, which is being recorded by customs but is not fully visible in import financing data available with SBP. The gap in import data for power generation equipment also widened dramatically to US$ 1.1bn in H1-FY17, from the previous 10-year’s average of just US$ 193 million. Since most power sector activity in the country is taking place under the CPEC umbrella, it is highly probable that the widening gap between the two import datasets is linked with the CPEC”.
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Re: Analyzing CPEC

Post by Prem »

chanakyaa
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Re: Analyzing CPEC

Post by chanakyaa »

jagga wrote:
kit wrote:after all the billions of chinese money what if pakis go and default on their loans ?? .. just take ove the cpec ?? .. there are no permanent friends in geopolitics btw
I feel it's not if but they will. That would mean that Paki's got shiny roads and other infrastructure for free! I am not a Arthsashtri, but seems like Paki's would get great infrastructure 'potentially' for free and which in turn may boost there economy. Not sure what makes Chinese to risk such a big investment in a failed state like Pakistan. There is good chance that Paki's will default and also risk (in Chini eyes) of India taking POK back.
I would be very surprised if Panda thinks that in a base case scenario they are going to get any money back. Read about Russia forgiving Cuba's $32 billion loan. There are many such cases in the past. What Pukistan is offering China is something no other country in the world would offer Panda and other way around.

1. Every large country who wants to flex its muscles abroad or test its foreign policy needs and thus picks certain easy targets which are guaranteed to produce successful or a positive outcome. If such a target (country) welcomes such a move (of getting screwed) openly, dudh mein shakkar. And Pukistan is such a country for Cheen. Plus, the bonus is that such an alliance also has common enemy/adversary, i.e. India.

2. Pukistan knows that Cheen is the only country in the world that has the capability to bring in significant investment and money to create local jobs which their Pakjabi leaders know that they are not capable of. No other country in the world will do it. You and I may not like the products they produce there, or the quality of products, but Chinese have managed to sell their garbage around the world, including India. Which means they can bring revenue, pay wages, make further investments and continue the cycle. It may not produce quality jobs, you and I like, but 100 extra jobs are better than no jobs. And, people prefer employment than unemployment-based-on-ideology. (**Proof: Post-2008 people in the west, especially those who believe in sound monetary policy, did not mind their governments literally printing money just so they can have their jobs back.)

3. Higher investment from the Chinese means additional security cover in PoK and GB by Chinese which will check any adventures by India in the region. This is a bonus.

4. Additional bonus is the build up of military on India's western front by Cheen, which Pukistan may be glad to see that happen.

5. Panda's monkey businesses in Africa also becomes relatively easy operating from Indian ocean port (raw material, final product etc.).
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Re: Analyzing CPEC

Post by CalvinH »

Surprised that Pakis dont know the modus operandi of Chinese Infrastructure loans. An escrow account is opened in HK with Chinese government depositing the loan money that is then used to pay the Chinese Infrastructure companies for their equipment's, machinery and labor. The money will never touch Paki shores or banking channels. Only the payments that will be due will be seen later as outflows. But there may be a moratorium on payments till these projects become operational. Which is 1-2 years away.

Chinese need employment for their factories. The desperately need exports to keep their factories going. They get 10 year worth of orders and employment for their Infrastructure companies. I dont think China is looking for long term returns right now when its trying to take some pressure off from internal issues.

All the machinery is imported. Plus the installers and operators are all Chinese. Is Pakis refuse to pay this infrastructure will go dead in no time.
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Re: Analyzing CPEC

Post by chanakyaa »

The argument of Chinese wanting to take pressure of internal issues is difficult to subscribe to. Here is why. China is, for the most part, still a developing country. If Chinese have excess labour, equipment, and money, they are better off investing in China, without taking geopolitical risk or Puki risk. The returns at home (money multiplier effect, increased infrastructure etc.) are much much higher than in a sh!thole like Pukistan, and that is why tough to buy that argument. You see with Pukistan "return of the money" is more important than "return on the money".
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Re: Analyzing CPEC

Post by Austin »

China Hails US Readiness to Cooperate on ‘One Belt, One Road’ Strategy

https://sputniknews.com/politics/201704 ... -one-road/
BEIJING (Sputnik) – US President Donald Trump met with Xi Jinping in Florida on April 6-7.

In a Saturday statement, the Chinese Foreign Ministry said that Xi welcomed US willingness to participate in cooperation within the "One Belt, One Road" strategy.

Xi also said that opportunities for Beijing-Washington economic and trade cooperation are broadening and China also plans to strengthen cooperation with the US in the law enforcement sphere, as well as in the fight against money laundering, drug trafficking and cybercrime.


The Chinese leader also stressed the importance of Chinese-US military ties, saying that the two sides should maintain the exchanges between their armed forces at all levels.

China's "One Belt, One Road" strategy was launched in 2013 and is aimed at developing infrastructure and strengthening ties between the Eurasian countries, focusing on the land-based Silk Road Economic Belt (SREB) and the 21st-century Maritime Silk Road.
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Re: Analyzing CPEC

Post by jagga »

chanakyaa wrote:Pukistan knows that Cheen is the only country in the world that has the capability to bring in significant investment and money to create local jobs which their Pakjabi leaders know that they are not capable of.
It has started to happen :D
For 'all-weather friend' China, Pakistan to ramp up breeding of donkeys
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Re: Analyzing CPEC

Post by CalvinH »

chanakyaa wrote:The argument of Chinese wanting to take pressure of internal issues is difficult to subscribe to. Here is why. China is, for the most part, still a developing country. If Chinese have excess labour, equipment, and money, they are better off investing in China, without taking geopolitical risk or Puki risk. The returns at home (money multiplier effect, increased infrastructure etc.) are much much higher than in a sh!thole like Pukistan, and that is why tough to buy that argument. You see with Pukistan "return of the money" is more important than "return on the money".
Why is it so difficult to understand. I am not an economist but the general consensus is that most of Chinese GDP growth is government investment driven. With a decade of that, the returns on this now is almost nothing for Chinese government and is actually fueling internal bubbles. Look at the ghost cities and empty highways. Chinese state owned companies are laden with surplus capacities. If Chinese government uses these for the local infrastructure it just makes the bubble bigger. Especially in power and road infrastructure sector. CPEC is a great way to have an order line ready for these factories and labor for another 10 years where the investment doesn't add to non-productive domestic infrastructure.

Internally for China its a battle between consumption and investment. Chinese government has to keep investing to keep the factories and jobs going in the country so that consumption doesnt slacks. But they cant invest internally. CPEC and OBOR is great way to managing both things together. Yes, there is a risk. But China right now needs more time to let the domestic consumption catch up the investment part. This just gets them more time without worsening the balance.
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Analyzing CPEC

Post by Peregrine »

X Posted on the STFUP Thread

China plans to finance $8 bn for Pakistan Railways’ Mainline
ISLAMABAD: China has shown its interest to fully finance over $8 billion for upgrading Pakistan Railways’ Mainline (ML-1) by enhancing amount of China Pakistan Economic Corridor (CPEC) up to $54 billion from earlier committed amount of $51.5 billion.
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Analyzing CPEC

Post by Peregrine »

CPEC fears

AT the start of this year I had raised the question whether the CPEC projects are loans or FDI. My January column in this paper titled ‘Chinese investment’ had gone on to conclude that overwhelmingly the CPEC funds fell within the definition of FDI.

The successive weeks saw a series of opinion pieces (including some in this newspaper) extensively discuss the loans and repayment obligations ‘arising from CPEC’ and whether or not the country will be able to afford these. The writers went on to calculate year-wise loan repayment instalments, repatriation of earnings as well as the cost of importing fuel for the power plants. To my mind these reflect an unnecessary phobia we have in this country about anything involving foreign loans. But more importantly these are trifling details which — regardless of what conclusion the writers reached — potentially take the CPEC discussion in the wrong direction.

To develop a robust and meaningful standpoint on any issue one needs to frame the right questions. So let’s look at the strategic logic of these projects once again. As a developing country, Pakistan is going to need tens of billions of dollars of investment to build power generation and transmission capacity. This is not a choice but an urgent and pressing need. In the world of corporate finance, investment projects involve three types of decisions and these decisions are independent of each other.

In other words, each decision is made on its own merit and is self-supporting. The first is capital budgeting where the decision is made (in principle) to buy a capital item (like a power plant). In the next step, the capital structuring is determined, ie what ratio of debt and equity is going to be optimal. And finally, the financing decision asks who will invest. The project developer’s job is to locate equity investors and lenders.

The question of whether the power plants should be in the private or public sector has already been settled in our successive IPP policies many years ago.

The third question is what plant and equipment is needed and whether Pakistan manufactures power generation and transmission equipment? If not, then there should be no quarrel with the fact that the equipment would have to be bought from somewhere abroad.

The fourth question is, what is our preferred choice of fuel? To a large extent, we have opted for natural gas- and coal-fired plants and till such time that new domestic reserves of these resources are discovered, these fuels would need to be imported.

The fifth question is that if you do not wish to create long-term, cross-border debt obligations then there is the option to pay for the equipment up front. In that case the project developers could be asked to raise local debt to the extent required according to the capital structure, and pay off the equipment supplier all at once and in foreign currency. Equity is always the more expensive form of financing because equity investors seek higher returns than banks. The world over, power projects can only be commercially viable if heavily leveraged.

But as can be seen, the question of debt comes very low down in the investment decision process. And by that time it is almost a foregone and inescapable conclusion that there would be heavy debt involved regardless of whether it comes from Chinese financial institutions or elsewhere. This cross-border debt comes tied with the equipment. The foreign currency requirements for repayment would be spread over 10 years or so. It carries a reasonable interest rate so there is no cause for alarm. Really?

Tailpiece: Recently in conversation with a prominent economic journalist, I mentioned that Chinese steel giant BaoSteel was planning an industrial park in the Gwadar Special Economic Zone to manufacture and export stainless steel. The apprehension came back immediately: “How can we be sure they will receive the export revenues in Pakistan and not in China?” This again echoed some of the unfounded fears one hears among our business community. Let me explain why this particular one is untenable.

Most of the costs would need to be borne locally. The cost of the finished product would include ore extraction and haulage of raw material to Gwadar, where it would be melted, rolled and drawn into refined finished product. All this involves substantial energy, capital and labour costs, most of which which would need to be paid locally. In this type of industry, where margins are wafer thin, these costs may be upwards of 90 per cent of the sales value. Hence it would make little sense for the steel manufacturer to receive payments for sales proceeds in China when most expenses are to be paid in Pakistan.

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Re: Analyzing CPEC

Post by arun »

Forget OBOR and CPEC for transit options lying to the West of India and instead think INSTC.

The International North South Transportation Corridor (INSTC) inches forward and provides India a potentially viable transit alternative on the West of our country to transit options in which the Peoples Republic of China is sponsor, such as One Belt One Road (OBOR) and in particular its China Pakistan Economic Corridor (CPEC) leg:

International North South Transportation Corridor for better Indo-Russian connectivity inches towards reality
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Re: Analyzing CPEC

Post by CalvinH »

Peregrine wrote:CPEC fears

All this involves substantial energy, capital and labour costs, most of which which would need to be paid locally. In this type of industry, where margins are wafer thin, these costs may be upwards of 90 per cent of the sales value. Hence it would make little sense for the steel manufacturer to receive payments for sales proceeds in China when most expenses are to be paid in Pakistan.

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Thats the whole plan. Energy, Capital and most labor costs will be paid to Chinese as they will be supplying Energy, Capital and the expensive labor component. Sales proceeds go to China (as customers belong to Chinese company) and so are the major cost payments. What Pakis will be left off with is net payments of cheap low skilled labor, and pollution.
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Re: Analyzing CPEC

Post by chetak »

Pak's dependence on CPEC
Pak's dependence on CPEC
By Anand Kumar, April 11, 2017.

Pakistan wants to make Gilgit–Baltistan its fifth province in addition to Punjab, Sindh, Khyber Pakhtunkhwa and Baloch.

For a slowly sinking Pakistan, the China-Pakistan Economic Corridor (CPEC) is seen as a saviour. Some describe it as a game changer as it is likely to create new jobs and bring economic prosperity for the Pakistani people. The CPEC may not dramatically change the fortunes of Pakistan but it has definitely exposed its nefarious designs in Kashmir.

Since 1947 when both India and Pakistan became independent, Pakistan has been eyeing Jammu and Kashmir. Though Kashmir has legally acceded to India in 1947, Pakistan has not reconciled itself to this fact. What is worse, it sees a Muslim majority province staying with India as a threat to the basic ideology on which Pakistan is founded.

Hence, it has tried several methods since 1947 to capture Kashmir. It has waged a number of wars against India and used terrorists. It has intensified the proxy war since 1989. All along, it has claimed that it is providing only moral, political and diplomatic support to the Kashmiris to achieve their right of self-determination.

But the false narrative that Pakistan has so assiduously built has been exposed by its decision to change the status of Gilgit–Baltistan (GB), which is also known as Northern Areas. Islamabad now plans to change its status by making it the fifth province of Pakistan. So far, Pakistan has only four states – Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan.

Pakistan’s minister for inter-province coordination Riaz Hussain Pirzada says that his government now plans to bring in a bill to amend the constitution of Pakistan in the National Assembly to give GB the status of fifth province of Pakistan. Prime Minister Nawaz Sharief’s special powers can also be used for that purpose. Whatever be the modus-operandi, the important thing is that Pakistan has decided to change the status of GB, which borders PoK. It also means that Pakistan no longer considers GB as part of J&K.

Pakistan has been calling the occupied areas of J&K as autonomous territories. It has been federally ruling these areas with puppet regional governments. Over the years, it has tried to integrate these areas in to Pakistan by settling Pakistani population there. Some people of Gilgit – Baltistan have been working in other parts of Pakistan including its military.

Still, this area is disturbed and has seen frequent ethnic conflicts. The Pak government has tried to subsume the ethnic identity of people of the region by spreading extremist religious ideology. In this effort, so far it has not been very successful. At the same time, it has not given up this approach to consolidate its hold over GB.

Ideally, Pakistan would like to continue with the present status of GB for some more time. But it is facing pressure from China which is investing nearly $51 billion in the CPEC project. The CPEC is not just a road project, it also includes energy, infrastructure, ports and industry related projects. This project has created great hope in Pakistan which is otherwise in turmoil.

A significant section of Pakistanis now thinks that the successful implementation of the CPEC would help the country come out of the morass it finds itself in. But the Chinese corporations which are investing billions of dollars in CPEC want security for their investment. Besides the law and order problem, there is no clarity on the constitutional status of GB.

The CPEC is the first chapter of Chinese One Belt One Road (OBOR) plan which is in recent times also called as the Belt Road Initiative (BRI). This is the pet project of Chinese President Xi Jinping who thinks that through OBOR, China can achieve its next stage of development. A number of Chinese policymakers think that they are facing the problem of `middle income trap’ and see OBOR as a way out of it.

Access to Indian Ocean
The successful implementation of the CPEC also makes China an ocean power. Besides, having access to the Pacific Ocean, the CPEC will also give it access to the vital Indian Ocean. The dependence of China on the Malacca Straits also creates a dilemma for them. They hope to overcome this by the CPEC. But the disputed status of the GB once again creates another dilemma for the Chinese.

The Chinese see the Indian opposition to the CPEC as a major hurdle in the implementation of the OBOR. Hence, they have now also invited India to join the CPEC. They have also stated that the mega project does not change the status of Kashmir. They are still repeating that India and Pakistan should try to resolve Kashmir issue through dialogue.

They have likened it to Taiwan and say that as Taiwan is free to develop its economic relationship with other countries, similarly Kashmir should be allowed to do so and reap the benefit of economic developments that CPEC is likely to bring to the region. China also argues that successful implementation of the CPEC would bring regional stability.

However, there is an important difference between the situation prevailing in Taiwan and Kashmir. Kashmir is facing continuous proxy war from Pakistani side. The present Pakistani game plan appears to be to incorporate GB as another province of Pakistan while keeping the remaining territory of Kashmir disputed by continuously waging proxy war through terrorists.

Though Syed Salahuddin of the United Jehad Council and Hurriyat leaders have opposed Pakistan’s plan, another tool in the Pakistani hand Zakir Rashid Bhat (alias Musa) of Hizbul Mujahideen has criticised the so called Kashmiri nationalism and urged them to be part of an Islamic caliphate. He also wants them to implement Sharia. Pakistan now seems to be working for closer integration of areas of J&K under its control while India, unfortunately, still debates the intricacies of its own constitution which stops the state from being mainstreamed.

(The writer is Associate Fellow, Institute for Defence Studies & Analyses, New Delhi)
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Re: Analyzing CPEC

Post by chetak »

OBOR and China’s attempts at bringing India under its yoke


OBOR and China’s attempts at bringing India under its yoke

Instead of joining schemes like OBOR, we’re better off following the Chinese proverb that says, “If you wait by the river long enough, the bodies of your enemies will float by”.

Posted By Sushant Sareen | Apr 3, 2017

After ‘socialism with Chinese characteristics’, followed by what may be called ‘capitalism with Chinese characteristics’, China is now unveiling its policy of ‘neo-colonialism with Chinese characteristics’. The manifestations of this strategy that aims to expand the Chinese footprint around the globe and alongside increase China’s influence and ensure its dominance at the global level are slowly becoming visible in Latin America, Africa, Central Asia, South East Asia and South Asia. The rubric under which this strategy is unfolding is the ‘One Belt, One Road’ (OBOR) initiative. One of the flagship projects of OBOR is the China-Pakistan Economic Corridor (CPEC), which runs through a part of Pakistan-occupied Kashmir and connects western China to the Gwadar port. Another proposed spur of the OBOR is the Bangladesh-China-India-Myanmar (BCIM) corridor. But India has not shown much interest in becoming part of BCIM. While the government of India has made clear its objections and concerns regarding CPEC, other projects like the Hambantota port in Sri Lanka are also causing enormous disquiet in India which sees these as part of an encirclement strategy of China.

Despite the very valid concerns and objections of India to CPEC in particular and OBOR in general, in recent weeks many Indian academics and analysts have been pleading China’s cause. They have warned India against “underestimating the transformative potential of the enterprise [OBOR]” and to be “mindful of the risks of having no stake in a transformative enterprise that most countries in the neighbourhood will inevitably be drawn into.” Other have cautioned that by not jumping on to the Chinese bandwagon, India would be “depriving itself of an opportunity to shape the transforming landscape of Asia”. There are also politicians like Jammu and Kashmir’s chief minister Mehbooba Mufti who have asked “Why can’t we [J&K] be partners in economic growth and share the benefits of projects like the CPEC”? It is probably too much of a coincidence that many of the voices seeking India’s kow-towing to the Chinese strategic game-plan are being raised at a time when the Chinese are desperately trying to get some sort of an endorsement from India on their OBOR plan and want India to participate at the highest level in the international conference on OBOR in May in Beijing. As an aside, it would be interesting to see how many of those who are towing the Chinese line in the media actually go for a fully paid (by the Chinese?) junket to Beijing in May this year.

In all the hype and hoopla surrounding the ‘Belt and Road initiative’, what has been conveniently glossed over is the fact that its economics is very dodgy, not so much for the Chinese as it is for the countries falling over themselves to partake in the project. Ideally, countries should look the Chinese gift horse in the mouth to know what they are getting, as well as what they are getting into. But perhaps the lure of money coming in is so attractive to the rulers of the day that they prefer to ignore the problems associated with payback in the future. This is standard operating procedure for politicians – grab what is coming in, use it for political advantage, and cross the bridge of payback when you come to it. Chances are that payback will come on someone else’s watch and at that time, you can spin the whole thing in a way that both sides of your bread get buttered. The prime example of this is the Hambantota port in Sri Lanka.

The then Sri Lankan president Mahinda Rajapakse went overboard in seeking Chinese investment in the Hambantota port and its related projects without bothering about the economic viability of these projects. By the time payback came, Rajapakse had lost the election and his successors are now having to carry the can with Rajapakse accusing them of selling out Sri Lanka’s interests by agreeing to give thousands of acres of land to the Chinese as part of a debt-equity swap because the Lankans were unable to service the debt they had taken for the port project. In Tajikistan, something similar happened. Unable to pay back the Chinese, the Tajiks were forced to part with more than a 1,000 square kilometres of land under the garb of settling a border dispute. The fear is that if the Pakistanis are unable to service the enormous debt they have taken, there could be a trade-off in land both in Gilgit-Baltistan region of Pakistan-occupied Kashmir (through which the CPEC road runs) as well as handing over the Gwadar port to China.

Clearly, for all intents and purposes, the Chinese seem to be throwing their money on economically unviable and illogical projects as part of a larger strategic gameplan. The Chinese model of colonisation is that they extract huge strategic benefits and concessions from smaller countries which are first given loans they can’t service and then are made to not just return the money but also part with territory. The small countries can neither resist the temptation of ostensibly easy money (which isn't coming from elsewhere whether in the form of loans or foreign direct investment) that they think will put them on a high growth trajectory, nor can they resist the arm twisting that inevitably follows from a China that uses both its economic and military power to extract its money as well as attain its strategic objectives. Using their influence, the Chinese ensure they get virtually captive markets and really attractive terms for their investments – the CPEC is a prime example where the Chinese dictate all terms and conditions to the Pakistanis, including tariffs, taxes, duties, repayment guarantees and what have you. While the Chinese go blue in the face insisting that OBOR projects (including ports, many of which are becoming their exclusive property) are purely commercial in nature, a few hundred years back, the ‘factories’ that the Europeans set up in India were also purely commercial in nature. But as time passed, the interests changed as did the nature and character of these ‘factories’. The same is likely to happen with the Chinese run ports that are likely to double up as naval bases. Add to this the increasing assertiveness and aggressiveness of the Chinese, and their proclivity to use strong arm tactics, it should be clear that the Chinese intentions are not as benign as they are being made out to be.

Therefore, for anyone to advocate India becoming part of this neo-colonial Chinese model is really to advocate putting the noose of the ‘Belt’ around India’s neck and becoming part of a ‘Road’ to subjugation. Quite frankly, the entire concept of OBOR is quite flaky. It talks of connectivity, cooperation and infrastructure development but when you start to breaking down the concept into its component pieces, it really doesn’t add up to anything in terms of a win-win for any country other than China.

Take the case of Pakistan. Despite its ‘higher than mountains, deeper than the oceans, sweeter than honey and stronger than steel’ relationship with China, the Chinese are not willing to give them the slightest concessions in the Free Trade Agreement that the two countries are negotiating. In fact, for all the talk of markets that connectivity and cooperation will promote, the Chinese allow extremely limited access to other countries to their markets.

What is more, the Chinese keep pontificating that business and politics shouldn’t be mixed, but that is precisely what they do to browbeat their neighbours. For instance, after a spat with Japan, the Chinese blocked all exports of rare metals to Japan and created an environment of hate against Japanese products. A similar action has been taken against South Korea after it decided to deploy the THAAD missile defence system. And if economic powerhouses like Japan and South Korea can be pushed around in this manner, what are the chances that smaller countries like Pakistan (okay, they are a different case because they revel in becoming underlings of a Great Power) or Sri Lanka, Philippines, Malaysia, Nepal, Myanmar, Bangladesh etc. can protect their political and economic interests with China?

Why then should India acquiesce to the Chinese game-plan? In any case, what do the Indians who counsel joining OBOR or even CPEC even mean when they advocate this line of action? Clearly, people like Mufti haven’t thought through OBOR or even CPEC, both of which make little sense for India as they are currently structured. What sense is there for J&K to use Gwadar to access world markets when it has access to world class ports on both western and eastern coasts of India? If CPEC will give access to the Pakistani market (for whatever that is worth), then this access is possible even without becoming part of CPEC. Gaining access to Xinjiang is neither here nor there, and gaining access to eastern or even to central China makes more sense by sea than by CPEC. In any case, even if India were to decide becoming part of OBOR (whatever that means, because no one really knows what that means) then perhaps the BCIM or some other variant of that makes greater sense than the CPEC. But ultimately connectivity has to be a two-way street and until now, all that the OBOR promises is a one-way street that serves only China’s economic, strategic and political interest. If the idea of CPEC is that it will provide access to Afghanistan and Central Asia, then it will be dependent on Pakistan’s munificence, which in itself is a mugs game for India. In the face of Pakistan's irredentism and bloody-mindedness, how can India ever allow its economic and energy security and its trade routes to be held hostage by the Islamic State of Pakistan?

The Chinese are slowly but surely becoming the regional hegemon. Given the size and power differential (both economic and military) between China and the other countries in the region (except for Russia, India and to an extent the Japanese), it is difficult for the smaller countries to stand up to China. Using both threats, blandishments and bribery, the Chinese are making forcing themselves on these countries which as mentioned earlier are not in a position to either resist the temptation of Chinese investments nor have the power to resist Chinese impositions. What the Chinese have also managed to do is take out the countries one by one and not allowing them to forge a common front to block the Chinese advance. The South East Asian example is quite instructive in this regard and the Chinese have managed to dent the ASEAN unity and in the process started to unravel the regional construct set up by the Americans to face up to the Chinese. Alongside, the Chinese are challenging the rules-based system, and forging new rules that serve their interests, something they are able to do quite brazenly because those who framed the earlier rules are not willing to or ready to enforce them.

To be fair to the Chinese, what they are doing is nothing new nor anything extraordinary. Everything that the Chinese are doing is dictated by the logic of power and has been done by earlier rising powers. But it is a logic that doesn’t gel well with India. Merely 70 years after shaking off the yoke of Western colonialism, for anyone to think that India will be ready to now go under the yoke of Eastern colonialism is really to live in cloud cuckoo land. For China’s advocates in India to say that India need not acquiesce with all of China’s plans or that it should seek greater clarity from Beijing about its plans smacks of journalistic ignorance. What are the Chinese plans that India can refuse to acquiesce to and still join OBOR? As for seeking clarity, that is exactly what India has been doing, but there is virtually no clarity coming from the Chinese side to India’s queries.

While it is true that India might not be able to stand in the way of China’s plans in the extended neighbourhood, it doesn’t mean that India has no options left. The Chinese know it and that is the reason why they are so desperate to rope in India and get its endorsement. Instead of succumbing to China’s pressure and proposition on OBOR, India should build its economic and military strength, forge diplomatic alliances and take diplomatic initiatives that protect its interests, and bide its time following the old Chinese proverb that says, “If you wait by the river long enough, the bodies of your enemies will float by”.

The author can be contacted on Twitter @sushantsareen
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Re: Analyzing CPEC

Post by ramana »

X-posted....
chetak wrote:
GShankar wrote:Yes, the pigeon is unusually silent. To my limited geograhical mind, gwadar needs to be handled first. Sort of like one stone two birds?

The argument could be made for any location in cpec but the impact would be highest in gwadar imo.
Attended a talk on strategy by a widely respected group of defence thinkers. There were also hard core operational types and not just mere strategists only.

One gem that stuck with me was that L&T has been asked to go slow on chabahar because of the uncertainty of the looming US sanctions on Iran.

Don't expect any public utterances from the pigeon. This entire region seems to be enveloped in uncertainty. No significant player in this region is free from uncertainty and most have hit the pause button momentarily waiting anxiously to see which way the winds would blow when they do pick up again.

The chinese carriers, those about to become operational as well as those fast completing new builds are bothering many stakeholders in the region as well as beyond
.
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Re: Analyzing CPEC

Post by venug »

India has no plans to disrupt China's trade routes but it will do so if India's security is threatened: CNS
posted by @YusufDFI but now cant find the tweet.
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Re: Analyzing CPEC

Post by Falijee »

CROSS POSTED FROM STFUP

AJK to Build a Tourism Corridor Under CPEC


CPEC investment pushed from $55b to $62b

The Express Tribune > Business

What else needs to be" shoved" under the all -encompassing arms of the CPEC ( Colonizing Pakistan To Enrich China )

Is it not high time that Pakistan itself becomes "part of CPEC" :twisted:
titash
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Re: Analyzing CPEC

Post by titash »

The Pakis twitterati are getting all excited about Malaysia joining CPEC. Not sure how they're going to manage that outside of Gwadar :shock:

http://trends24.org/pakistan/pakistan/

http://trends24.org/pakistan/lahore/

http://trends24.org/pakistan/rawalpindi/
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Analyzing CPEC

Post by Peregrine »

X Posted on the STFUP Thread

CPEC payments

Why is China shutting down coal plants in China and setting up new ones in Pakistan?

Dozens of projects under CPEC continue to be shrouded under a thick veil of secrecy. On February 14, the Ministry of Water and Power submitted details on the financing and tariff structures of eight energy sector projects during a meeting of the National Assembly’s Standing Committee on Planning and Development. Here are the details:

Eight projects: The power sector projects for which the details of the financing and tariff structure were disclosed are: the Engro Powergen Thar Coal-II, the Port Qasim Power Plant, the Thar Coal Power Plant, the Hubco Coal Power Plant, the Thar Energy Limited, the Sahiwal Coal Power Project, the Suki Kinari Hydropower Project and the Karot Hydropower Station.

Cost: The eight projects will cost a total of $12.5 billion. Of the $12.5 billion, roughly $9.5 billion will be debt and the remaining $3.125 billion will be contributed as equity by the sponsors. Generation capacity: The project will have a cumulative generating capacity of 7,680MW. The cost per MW amounts to $1.6 million (similar projects in Bangladesh cost around $1.1 million per MW and, in India, the cost per MW is under $1 million).

Debt: The rate of interest that has been agreed upon is around six percent (Libor + 4.5 percent). In addition, the China Export & Credit Insurance Corporation will charge a premium of seven percent as ‘insurance premium’ for the loan (even though the entire loan has been guaranteed by the government of Pakistan). This payment is a ploof of Clapistan's Fliendship with the Higel than the Himalayas & Deepel than the Pacific Ocean Fliend. :rotfl:

Equity: The return on equity guaranteed by the government of Pakistan on the eight projects range from 27 percent per year on Hubco coal power plant being built in partnership with China Power Hub Generation Company to 34 percent per year on the 1,320MW Thar Coal Power Project by the Shanghai Electric Power Company.

Debt and equity payments: The annual debt repayment on $9.5 billion will be around $840 million per year (principal plus interest). For the first year, Pakistan must also pay an amount of $665 million as ‘insurance premium’ to the China Export & Credit Insurance Corporation. The annual return on equity on the equity of $3.125 billion will be around $900 million per year every year. In the first year, the total payment that Pakistan will have to make will be $2.4 billion followed by an annual payment of $1.8 billion thereafter.

Tariff: The average tariff for coal-based power plants has been disclosed as Rs8.3 per unit. The catch here is that Pakistan’s National Electric Power Regulatory Agency (Nepra) has calculated the tariff at 85-percent plant efficiency while independent energy experts claim that the efficiency factor will be much lower and, thus, the actual tariff will be much higher.

Questions: How will the eight power projects create a surplus of $2.4 billion during the first year, enabling Pakistan to pay the principal, interest and the insurance premium? Why is the capital cost on a per MW basis higher in Pakistan than what it is in Bangladesh and India? Why is China shutting down coal plants in China and setting up new ones in Pakistan? What will happen if Pakistan is unable to make the payments that we have promised (in Tajikistan the Chinese demanded land in return)?
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Re: Analyzing CPEC

Post by ramana »

Xi is offering Trump a cut in CPEC as he knows NaMo is getting ready for Narasimha avatar on TSP.
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Re: Analyzing CPEC

Post by Rudradev »

ramana wrote:Xi is offering Trump a cut in CPEC as he knows NaMo is getting ready for Narasimha avatar on TSP.
Yes, and Nikki Haley statement about mediation in J&K, plus stepped up 4GW in the valley, indicates that Trump has shown signs of reciprocating the offer.

Other than a cut in OBOR the Chinese are probably offering at least a semblance of cooperation on NoKo, withdrawal away from the Russia-Iran position in Syria, and maybe a guarantee of safe face-saving exit for US military from Afghanistan after a Paki-Chini backed Taliban regime has been installed there.

In exchange Trump will water down Pivot To Asia (notwithstanding current theatrics with Carl Vinson CBG), cede Asia in general to the Chini sphere of hegemony. And at the very least, posture more aggressively against India than any POTUS since George HW Bush (if not Nixon).

Kissinger, aged 93, has reasserted himself with a vengeance.

Silver lining is that fXi begging Trump/US to back him up on CPEC/OBOR shows that the Chini have no guts to take on India by themselves, or even with Paki support, unless Unkil backs them up.
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Re: Analyzing CPEC

Post by GShankar »

So, this means:

1) Russia might not have provided enough support to cheen on OBOR
2) Cheen has figured Russia's limitations
3) Cheen wants to compete and acquire Russian land and influence as part of their OBOR game plan

I am assuming scenario 3 is more likely and if that is the case the bear would also have realized this and will probably start engaging with us in a much more meaningful way.

One thing we should be keen on is to grow our capabilities to stand our ground in our primary regions of importance and offers will come our way by itself. Be it US or Cheen, they could grab lands in the short/medium term. But then they have to sell us goods and services to be profitable themselves. I believe MAD would be able to highlight this to enough people in massa.
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Re: Analyzing CPEC

Post by chanakyaa »

Why is China shutting down coal plants in China and setting up new ones in Pakistan?
Coal in 'freefall' as new power plants dive by two-thirds

Coal fired plants are the most hated around the world. Developed countries have taken firm steps to reduce the dependence on coal plats. With China cutting down plants at home, the excess coal has no where to go other than hell, i.e. Pukistan. Plus all new adventures in Pukistan need electricity; and the bonus is that the coal mining jobs in China will be saved as coal is forcibly imported by Pukistan.

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Re: Analyzing CPEC

Post by Falijee »

Latest Buzz: Malaysia ( also ) has expressed interest to join CPEC :

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Re: Analyzing CPEC

Post by GShankar »

All pollution creators in our vicinity. Another attempt by the lizard and pig to persuade us. All coal plants along cpec should be destroyed by baloch freedom fighters since this will make their land uninhabitable.
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Re: Analyzing CPEC

Post by titash »

Falijee wrote:Latest Buzz: Malaysia ( also ) has expressed interest to join CPEC :

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What's interesting is while the Pakis are going to town about #WelcomeMalaysiaToCPEC, it doesn't even figure in the Malaysians' Top 10.

http://trends24.org/malaysia/malaysia/

http://trends24.org/pakistan/pakistan/

It really is a matter of perspective...
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