Second Phase of CPEC

  • GS Paper – 2, Agreements Involving India and/or Affecting India’s Interests


  • Earlier this month, Pakistan and China inked a new deal to begin construction on the second phase of the USD 60 billion China-Pakistan Economic Corridor (CPEC).
  • At a previous meeting, Pakistani officials addressed the possibility of Taliban-led Afghanistan becoming a partner in the multibillion-dollar China-Pakistan Economic Corridor (CPEC).
  • The second phase is largely concerned with the development and industrialization of Special Economic Zones (SEZs).

What is the China-Pakistan Economic Corridor (CPEC)?

  • The China-Pakistan Economic Corridor (CPEC) is a 3,000-kilometer-long network of infrastructural projects that connects China’s northwest Xinjiang Uygur Autonomous Region with the Gwadar Port in Pakistan’s western region of Balochistan.
  • It is a bilateral initiative between Pakistan and China that aims to improve connectivity across the country by constructing a network of roads, trains, and pipelines that would be complemented by energy, industrial, and other infrastructure development projects in the country.
  • As a result, China would be able to reach the Middle East and Africa through Gwadar Port, allowing it to gain access to the Indian Ocean. In exchange, China will finance development projects in Pakistan, helping the country to solve its energy difficulties and stabilise its faltering economy.
  • The China-Pakistan Economic Corridor (CPEC) is a component of the Belt and Road Initiative. Founded in 2013, the Belt and Road Initiative (BRI) aspires to connect Southeast Asia, Central Asia, the Gulf area, Africa, and Europe through a network of land and maritime links.

What is India’s position on the China-Pakistan Economic Corridor?

  • In view of the fact that the CPEC travels through Pakistan-occupied Kashmir, which is a disputed area between India and Pakistan, India has been extremely critical of the project.
  • India has also expressed its dissatisfaction with China over the CPEC, which is being built across Pakistan-occupied Kashmir (PoK).
  • With the Quad countries (India, the United States, Australia, and Japan), which may give realistic alternatives for countries seeking infrastructure as well as a viable alternative to China, India has a lot to offer. Several possibilities have been proposed by the member nations of the Quadrilateral Cooperation.
  • For instance, the Blue Dot Network (BDN) and the Build Back a Better World (B3W) initiatives are two examples.

What are the implications of the China-Pakistan Economic Corridor (CPEC) for India?

Assertion of Indian Sovereignty:

  • India has been vocal in its opposition to the project as it runs through Pakistan-occupied Kashmir area of Gilgit-Baltistan, a claim that Pakistan strongly opposes.
  • On the Indian side of the border, the corridor is also considered to be a viable alternative economic route link for Kashmir Valley residents and visitors.
  • The initiative has received positive responses from the majority of significant actors in the Indian state of Jammu & Kashmir.
  • Local business and political leaders have called for the declaration of Kashmir as a ‘Special Economic Zone’ on both sides of the Line of Control (LoC), which divides the country.
  • If the China-Pakistan Economic Corridor (CPEC) proves to be a success, a well-connected Gilgit-Baltistan that attracts industrial development and foreign investment will further solidify the region’s perception as internationally recognised Pakistani territory, undermining India’s claim to the 73,000 sq km piece of land that is home to more than 1.8 million people.

Trading with China by Sea is Under Chinese Control: 

  • Major US ports on the East Coast rely on the Panama Canal to conduct business with China.
  • Once the China-Pakistan Economic Corridor (CPEC) is completely operational, China will be in a position to provide a’shorter and more inexpensive’ trading route to most North and Latin American companies, bypassing the need to go across the whole Western Hemisphere.
  • In doing so, China will gain the ability to control the terms under which international trade in products will take place between the Atlantic and Pacific seas.
  • With the goal of establishing a “String of Pearls” in the Indian Ocean, China has been expanding its footprint in the region. It is a phrase created by the Americans and frequently used by Indian defence strategists to allude to China’s strategy of encircling India with a network of airfields and ports.
  • After already having established presences at Bangladesh’s Chittagong port, Sri Lanka’s Hambantota port, the Sudanese port of Port Sudan, the MaldivesSomalia, and the Seychelles, a Communist nation’s control of Gwadar port will give it total control over the Indian Ocean.
  • The emergence of Pakistan as an Outsourcing Destination has the potential to accelerate the country’s economic development.
  • Pakistani exports, which are mostly concentrated in the textile and building material industries, compete directly with those of India in the United States and the United Arab Emirates, which are two of the top three trading partners of both nations.
  • As the supply of raw materials from China becomes more readily available, Pakistan will be well positioned to establish itself as a regional market leader in these areas – mostly at the expense of Indian export volume.

Increasing China’s BRI Project and Chinese Dominance in Trade Leadership:

  • China’s Belt and Road Initiative (BRI) project, which focuses on the connectivity of China and the rest of Eurasia through a network of port facilities, roads and railways, has been interpreted as part of China’s strategy to dominate the region politically. The China-Pakistan Economic Corridor (CPEC) is a big move in the same direction.
  • The United Nations, as well as individual countries, will benefit from a more accepted and integrated China, which might be bad news for India, which is seeking to become the first Asian country to hold a permanent seat on the United Nations Security Council.

The Best Way Forward

  • An in-depth re-evaluation of the possible benefits and drawbacks of the BRI project must be the basis of India’s future policy focus on CPEC and the Belt and Road Initiative (BRI).
  • Work on India’s own strategic projects, such as the Bangladesh-China-India-Myanmar Economic Corridor (BCIM) and the Chabahar Port, should move forward more quickly.
  • The Asia-Africa Growth Corridor is an economic cooperation pact between India and Japan, and it has the potential to offer India with significant strategic benefits while also countering China.


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