• China-Pakistan Trade

China-Pakistan Trade (Photo : Getty Images)

China is now the largest direct foreign investor in Pakistan, which is taking advantage of the billions of dollars poured to infrastructure overhaul brought about by China's "On Belt, One Road" initiative, the Straits Times reported.

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With China overtaking the U.S., Pakistan has strengthened its ties with its neighboring country while its relationship with the U.S. is in tatters.

China has been strengthening its relations with Pakistan after it pledged to fund the $55 billion development of the China-Pakistan Economic Corridor (CPEC), an initiative that is expected to bring progress to a country of about 200 million people.

From July 2013 to January this year, China's direct investment in Pakistan has reached $1.82 billion, compared to the U.S. with $505 million, according to central bank data.

"As the U.S. looks inward, China is reaching out," Bilal Khan, a senior economist at Standard Chartered in Karachi, said. "Against this backdrop, the U.S. could steadily lose its share in FDI (foreign direct investment) to Pakistan as China rises."

According to the report, improving its ties with China is part of Pakistan Prime Minister Nawaz Sharif's plan to boost economic growth to the country. On the other hand, China wants to implement its Silk Road plan to enhance trade across Central Asia and Europe by revitalizing the ancient route with a network of railways, highways and ports.

A record number of 77 Chinese companies have registered in Pakistan in the last three years, showing China's rising corporate presence in the country, the report said.

U.S. investments

Meanwhile, U.S. investments in Pakistan have reportedly been reinvestments from companies that were already based in the country. Last year, Philip Morris International injected $105 million to improve its facilities and install new machinery for its manufacturing operation in the country.

The report said that U.S. investments were not as big although large multinational firms such Procter & Gamble and General Electric have been operating in Pakistan. In January, General Electric turned over seven locomotives to Pakistan Railways as part of a $400-million deal for the purchase of 55 train units over the period of ten years.

"We are not on their radar. They tend to stay away when it comes to Pakistan," Abdul Aleem, chief executive of the Karachi-based Overseas Chamber of Commerce and Industry, representing 195 foreign firms, including 31 from the U.S., said of American investors.

Chinese investment

According to Chen Fengying, an expert on global economy with the China Institute of Contemporary International Relations, the CPEC is located "right at the crossroad" of two major networks China is building.

She added that investments between the two countries grew rapidly because they have built up trust over the years.

"Pakistan is the only country being called an 'all-weather strategic partner' by the Chinese government, signaling a sense of unwavering support under all conditions," Chen said.

Analysts, however, said that the slowdown in U.S. investment in Pakistan was due to reasons, other than simple economics.

Shaista Tabassum, chairman of the University of Karachi's international relations department, noted that Pakistan and the U.S. relations are moving farther apart.

"It is moving slowly down," she said. "CPEC has many economic benefits coming, which Pakistan expected the U.S. should have given to it."