The story behind China refusing BRI funds to Pakistan: Unpaid $1.5 bn power bill, attacks on Chinese nationals

Cracks between Pakistan and China became more apparent after reports emerged that Beijing has withdrawn funding for the Karachi-Rohri railway project, a key part of the China-Pakistan Economic Corridor. According to The Economic Times, China cited financial and security concerns for its move.

In light of this, Pakistan is now seeking funds for the Asian Development Bank to salvage the project. It is pertinent to note that China’s decision also follows its frustration over unpaid debts to Chinese power companies. However, the key concern for Beijing remains security issues for Chinese nationals working on numerous infrastructure projects in Pakistan.

China’s decision not to finance the Karachi-Rohri railway segment being built under its Belt and Road Initiative (BRI) reflects that its “ all-weather friendship” with Pakistan is notwithstanding. The change in the ties between the two nations is also coming at a time when China is mending its ties with India.

China’s withdrawal left Pakistan short of money

According to The Economic Times, the Chinese authorities expressed frustration over Pakistan’s unpaid debts, particularly $1.5 billion owed to Chinese power companies. Moreover, since 2021, several Chinese nationals working on BRI projects in Pakistan have been killed by separatist and terrorist groups operating in the country.

The Karachi-Rohri section of Main Line 1 Railway was previously expected to receive $2 billion from China. However, it had been left unfunded, leaving Pakistan to knock on the doors of the Asian Development Bank (ADB), seeking urgent funds to salvage the second phase of the China-Pakistan Economic Corridor (CPEC), sources told The Economic Times.

China also expressed concern over the security of its nationals in Pakistan while speaking to the country’s Field Marshal Asim Munir. Earlier this year, Beijing sought permission to deploy its military for the protection of its nationals in Pakistan.

Source told The Economic Times that Pakistan’s loan request to the Asian Development Bank involves upgrading 480 kilometres of the Karachi-Rohri railway segment. The total cost of the project is estimated to be $6.7 billion, covering the entire 1,726-kilometre stretch from Karachi to Peshawar.

The railway network is considered central to the CPEC and will be used for transporting goods as well as minerals extracted in the mineral-rich Balochistan province. The cracks between China and Pakistan are also coming at a time when Islamabad is improving its relations with the United States.

Earlier, Pakistan had indicated that it would offer the US opportunities in Balochistan’s mining sector. However, the US’s commercial or security presence in Balochistan may impact China’s wide-ranging interests in the province, a source told ET.

Under the BRI, China has announced that it will invest more than $50 billion in Pakistan. In light of this, Gwadar Port has been constructed, and plans for a naval base are currently underway. On Thursday, Pakistan’s energy ministry announced that ADB had approved a $130 million loan for the country’s energy sector.

Apart from this, Pakistan has also sought assistance from international partners, including the ADB, to improve its energy infrastructure by modernising its transmission system and promoting renewables.