China and Pakistan have been forming ties since the 1950s. This has evolved into an extensive partnership, notably under the Belt and Road Initiative.
The relationship is based on mutual interests and has resulted in significant Chinese investment in Pakistani infrastructure. Particularly, the focus of this investment was in the power sector.
The Chinese electric vehicle giant BYD is preparing to enter Pakistani markets. This could be the beginning of a new phase in the bilateral relationship, one that will potentially change the energy landscape as well as the economic future for Pakistan.
China’s investments in Pakistan
China has invested billions of dollars in Pakistan’s power and infrastructure as part of the China-Pakistan Economic Corridor, a project that is a centerpiece under BRI.
These investments over the last decade have resulted in the construction of new power plants throughout the country. Pakistan now has a total capacity installed of 42,000 MW.
This expansion was not without challenges.
Pakistan has seen its electricity consumption fall by a significant amount despite the increase in capacity. Peak usage is only 20,000MW.
The Pakistani government is now facing a heavy financial burden as it must pay for all 42,000MW of capacity, irrespective of the actual use.
This situation was aggravated by the economic stagnation of the last two years. Pakistan is now left to pay for the underutilized infrastructure.
Aurangzeb, Pakistan’s Finance Minister recently agreed to reschedule the loans that were taken to fund these projects.
Pakistan once owed Chinese companies that operated in Pakistan nearly $2 billion.
Rescheduling these debts may have provided temporary relief but it does not address the issue at its core of excessive capacity.
BYD: A new chapter for Pakistani-Chinese relations?
China is looking to expand its influence in Pakistan as it struggles with the energy crisis.
BYD is one of the leading EV producers in the world. Today, it will launch their vehicles in Pakistan, marking a major milestone for the automotive industry in Pakistan.
It is more than just a way to sell cars. This represents an effective use of Pakistan’s surplus energy.
BYD chose Hub Power Company Limited to be its partner in Pakistan.
HUBC has a long history of collaborating on energy projects with Chinese companies through Mega Motors Limited.
The company has previously worked with China Power Hub Generation Company in Pakistan to set up two thermal power stations. It also works with China National Machinery Industry Corp. (Sinomach), to build additional power plants.
Sinomach is expected to be a major player in the establishment of BYD operations in Pakistan. Sinomach recently finished BYD’s factory in Thailand.
It is unclear whether BYD plans to establish an assembly facility or manufacturing plant, but there’s one certainty: China’s involvement with Pakistan’s energy sector will ensure that the country’s access to power will be unaffected.
Continued influence of China over Pakistan
BYD’s entry to Pakistan could be seen, with China’s massive investments in power, as a strategy for making full use of Pakistan’s infrastructure.
Some may see this as China continuing its influence in Pakistan. Others might say that the move is a way to solve Pakistan’s surplus of energy by driving economic growth and industrial development.
This development raises concerns about its long-term effect on Pakistan’s sovereignty and economy.
Pakistan is more dependent on China than ever before. While China’s investment provides much needed infrastructure and growth in the industrial sector, it also increases Pakistan’s financial obligations.
The public in Pakistan is anxious to watch the new BYD vehicles launch.
Will this be good for Pakistan? Or will it only further entrap the nation in debt and dependence? Time will tell.
The post China’s energy investment set the stage for BYD’s launch in Pakistan. Will it be beneficial? This post may change as new information becomes available
