China picked a dam project in northern Pakistan for its first investment by a $40 billion Silk Road infrastructure fund as President Xi Jinping looks to expand the country’s influence across three continents.
The fund will become a shareholder of China Three Gorges South Asia Investment Ltd., which will construct the Karot dam on the Jhelum river, according to a statement on the Chinese Foreign Ministry’s website on Tuesday. The total investment will be $1.65 billion, according to the People’s Bank of China.
“We don’t subscribe to the view that a country expands hegemony when it becomes powerful,” Xi told Pakistani lawmakers on Tuesday. “Peaceful development is in China’s interest and also in the interest of Asia and the world.”
Xi’s visit is the first by a Chinese head of state in almost a decade to Pakistan, a nation that’s key to to his efforts to access the Indian Ocean over land and boost trade with Europe, Africa and the Middle East. China is Pakistan’s top trading partner, and they have a mutual distrust of India.
The two nations are planning $45 billion in projects along a 3,000-kilometer (1,850 miles) corridor stretching from Xinjiang in western China to Gwadar on the Arabian Sea. The investments -- $28 billion of which were announced this week -- would boost Pakistan’s economic growth and provide another route for China to import oil from the Middle East.
The Karot dam will be located in Rawalpindi near the capital Islamabad. It’s a “great match” between the development strategies of the two nations and a priority project in the China-Pakistan Economic Corridor, China’s central bank said in its statement.
The 720-megawatt run-of-river dam would take about six years to build, according to project disclosure documents filed by the World Bank’s International Finance Corp., which is investing $125 million in China Three Gorges South Asia Investment Ltd. The project would generate 75 percent of its energy during the summer months when water flow in the Jhelum river is at its highest, the documents show.
China Three Gorges Corp., the Beijing-based developer of the world’s largest dam, expects to become Pakistan’s biggest clean-energy company with plans for $5.5 billion of hydropower, solar and wind projects totaling more than 2,000 megawatts in capacity, according to the IFC. Pakistan requires as much as $20 billion in investments over the next five years to overcome a 10,000-megawatt shortfall in power capacity, it said.
On Monday, Xi and Pakistani Prime Minister Nawaz Sharif signed pacts to build roads, ports and power plants, nearly equal to the amount of foreign aid the U.S. has provided to Pakistan over the past decade to support its war in Afghanistan.
If realized, the investments will help Sharif revive Pakistan’s economy, which suffers from chronic power failures and an insurgency that has killed more than 50,000 people since 2001. Sharif has received a loan from the International Monetary Fund to help put the country’s finances back on track.
“It’s very significant,” said Mohammed Sohail, chief executive officer of Topline Securities Ltd. in Karachi. “It can bring a big change for all our economic fundamentals, in particular in energy.”
Pakistan’s benchmark stock index has been among Asia’s best performers over the past six months. It fell 0.9 percent at 11:29 a.m. local time, the most in three weeks.
The 51 agreements included an “All-Weather” strategic partnership that seeks to formalize longstanding defense ties between the nations. They also pledged to fight terrorism and help bring peace to Afghanistan. The two nations may conclude the sale of eight Chinese submarines, more than doubling Pakistan’s fleet.
Xi met the chiefs of Pakistan’s armed forces and called the operation against militants near the Afghan border a game changer in bringing peace, army spokesman Major General Asim Bajwa said on Twitter. Xi also pledged to contribute in the effort, Bajwa wrote, without providing details.
China is viewed more favorably in Pakistan than in any other Asian country, Pew Research Center found in a poll conducted last year. Pakistanis gave a 78 percent favorable rating to China, compared with 14 percent for the U.S., the poll showed.
“We are truly iron brothers,” Sharif said. “All political parties have one united stance -- Pakistan should have a robust bond with China.”