The Opportunities and Challenges That the Belt and Road Initiative Brings: Analysis from Perspective of China-Pakistan Economic Corridor

TLDR: In this paper, the authors make a theoretical analysis of BRI and CPEC and explore the reason why CPEC may succeed from the perspectives of balanced growth development theory and the neoclassical growth theory.

Abstract: Driven by the Belt and Road Initiative (BRI), China and Pakistan as all-weather strategic partners announced a big move to build the China-Pakistan Economic Corridor (CPEC) in 2015, aiming to link Pakistan’s Gwadar Port to China’s Xinjiang autonomous region. CPEC leads two countries into economic cooperation in critical areas including manufacture, energy, logistics and transport. The Belt and Road initiatives (BRI) project could bring economic avenues to Pakistan and foster regional and cross-regional economic growth as well as trade integration between Central Asia, South Asia, West Asia and East Asia. This paper not only makes a theoretical analysis of BRI and CPEC but also explores the reason why CPEC may succeed from the perspectives of the balanced growth development theory and the neoclassical growth theory. Theoretically, openness and massive capital are key factors for less developed economies to transfer into a sustainable growth state. However, these countries are disadvantageous in both openness and capital funds. Therefore, an external big push of massive investment is needed for them. Only through investing simultaneously in most complementary industries and regions, can they make economies to step into the growing path, and then to grow sustainably. Once the big push ignites the growth engine, economies acquire advantages of catch-up mechanism and converge to steady state. Therefore, CPEC focusing on aid-for-trade as well as substantial infrastructure development is capable of boosting economic prosperities for both China and Pakistan. In addition to theoretical analysis, this article identifies different types of socio-political impediments against BRI and CPEC, ranging from environmental aspects to socio-political structures. Pakistan has long been struggling with socio-political factors: low literacy rate, turbulent political situation, terrorist attacks, crimes, wars and corruption. All these negative factors pose essential challenges for transnational investment and infrastructure projects.