Seeking Funds, Pakistan Turns to ‘Strong’ Ally China

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OCTOBER 15, 2008

By SHAI OSTER and JASON LEOW in Beijing, and MATTHEW ROSENBERG in New Delhi

Pakistan’s president Asif Ali Zardari began a four-day state visit to China on Tuesday, seeking aid for his near-bankrupt nation from an increasingly powerful ally.

“China is the future of the world,” Mr. Zardari, widower of slain former Prime Minister Benazir Bhutto, told Chinese state news agency Xinhua on the eve of his trip. “A strong China means a strong Pakistan.”

AFP/GettyPakistan President Zardari arrives in Beijing for a trip aimed at securing aid and building economic ties between the two countries.

Pakistan’s economy was already in a critical state before the global financial crisis. Mr. Zardari is reaching out to China, the U.S. and Saudi Arabia, among other so-called Friends of Pakistan, to make the case that the world has an interest in helping to stabilize the nuclear-armed nation, which has been shaken by Islamist militancy.

Pakistan is seeking $5 billion to $6 billion from donors. Government officials are urgently trying to shore up dwindling foreign-exchange reserves — now down to $8.32 billion — and revive the ailing economy by boosting the confidence of foreign investors. It sees China as a substantial source of this capital.

On his first official visit abroad since taking office, Mr. Zardari promised to return to China every three months and said the relationship would focus on business.

Shaukat Tarin, economic adviser to Pakistani Prime Minister Yousuf Raza Gilani who was in Washington early this week, said Pakistan had secured $1.4 billion from the World Bank, and expected additional financing from the Asian Development Bank.

The U.K., meanwhile, doubled its aid to Pakistan and will give the country about $825 million over the next three years, according to the British High Commission in Islamabad.

But China may offer Islamabad its best hope for a major cash infusion. The Asian giant’s foreign-exchange reserves are the world’s largest, at $1.9 trillion. Chinese officials could be eager to demonstrate their new wealth and diplomatic heft, analysts say.

“China is already involved in building a large port in Pakistan. But neither Chinese nor Pakistani officials have offered details of any current aid agreement.

The decades-long friendship between China and Pakistan is grounded in arms sales, energy assistance and an all-weather geopolitical alliance. China has sold conventional weapons and missile technology, and is suspected of helping Pakistan develop nuclear weapons. In 2006, China and Pakistan signed a pledge to increase bilateral trade to $15 billion a year by 2011.

As India and the U.S. have worked to complete a civilian nuclear agreement, China and Pakistan have discussed a similar deal. A Chinese foreign-ministry spokesman said there would be “in-depth discussions” on cooperation in “some major areas,” but declined to confirm if a nuclear deal was in the works. Xinhua, quoting the Pakistani foreign ministry, said China and Pakistan expect to sign “several agreements” during Mr. Zardari’s visit.

Pakistan’s ties with the U.S. remain fraught with tensions. Mr. Zardari has reached out to U.S. leaders, but in doing so has faced criticism at home, particularly because of repeated U.S. missile strikes inside Pakistani territory targeting Islamist militants near the Afghanistan border. An economic collapse would only further undermine the battle against Islamic militants, experts warn.

Write to Shai Oster at shai.oster@wsj.com and Jason Leow at jason.leow@wsj.com

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