China to double trade with Pakistan

22 agreements signed by business houses at Islamabad conference could increase bilateral trade to US$18bn over the next five years.

Wen Jiabao, the Chinese premier, left , and his Pakistani counterpart Yousuf Raza Gilani arrive for a tree-planting ceremony in Islamabad yesterday.

ISLAMABAD //Wen Jiabao, the Chinese premier, yesterday oversaw the signing of agreements aimed at more than doubling trade with Pakistan over the next five years.

The 22 agreements signed between Chinese and Pakistani business houses at a conference in Islamabad targeted an increase in bilateral trade to US$18 billion (Dh66.1 bn) by 2015, from $7bn in 2009.

The two countries signed a free trade agreement in November 2006 that is expected to go into full effect in 2011.

The Associated Press of Pakistan reported that the agreements dealt with cooperation in agriculture, food, machinery, and space and upper atmosphere research.

Pakistani state television reported yesterday's deals also included agreements by Chinese companies to invest $6.5bn in alternative energy projects. A further $1.5bn would be invested on the rehabilitation and capacity expansion of aging power generation plants.

The Chinese and Pakistani governments had on Friday signed 13 initial agreements for joint ventures in agriculture, banking, energy, technology and urban security.

Few details of the agreements have been released.

Senior Pakistani officials on Friday estimated the value of the trade and investment agreements signed during Mr Wen's three-day visit at about $25bn.

They said the deals would push China's average annual investment in Pakistan to more than $3bn a year from 2012, from the present $2bn.

That is double the annual $1.5bn in economic assistance from the United States, under a five-year deal that started this year.

The reams of agreements signed in Islamabad underscored the close relations between China and Pakistan.

"China and Pakistan were, are and will always be good neighbours, good friends, good partners and good brothers," Mr Wen told Yousaf Raza Gilani, the Pakistani prime minister, during talks on Friday, Xinhua. the Chinese news agency, reported.

The two premiers have held one-to-one talks on consecutive days, while the heads of Pakistan's major political parties, the chief ministers of its four provinces, and armed services chiefs met the Chinese premier in Islamabad yesterday.

The bonhomie in Islamabad contrasted with the cordial but cautious interaction between Mr Wen and Manmohan Singh, the Indian prime minister, in New Delhi on Thursday.

The Asian powers share 2,000km of disputed border, over which they fought a 1962 war.

The only concrete outcome of their dialogue was an agreement to raise bilateral trade to $100bn by 2015, from $60bn last year.

China is India's biggest trading partner, and the two countries account for more than half of global economic activity.

Mr Wen committed to improve the balance of trade, which is tilted heavily in China's favour, but did not agree to a proposal to lift restrictions on Indian software, agricultural products and pharmaceuticals.

China's trade with Pakistan is similarly imbalanced and much smaller in volume, reflecting Pakistan's weak economy and narrow range of exports.

Mr Wen's deliberations in Islamabad have also prioritised Chinese assistance in rebuilding areas of Pakistan destroyed by massive flooding in July and August.

He yesterday announced a $400 million loan to help Pakistan tackle the financial impact of the floods, and a cash grant of $10m towards a Pakistani fund to compensate people rendered homeless.

The floods affected about 21 million Pakistanis, killing almost 2,000 people, and rendering about 10 million homeless.

It caused damage valued at $9.7bn in a joint assessment issued by the World Bank and Asian Development Bank in October.

The loan is in addition to a $229m grant agreed to on Friday for the repair of roads and bridges, and to spur the recovery of food production in flooded areas.

The road works would include the rehabilitation of damaged sections of the Karakorum Highway, a 1,300km motorway linking China and Pakistan.

China's flood assistance to Pakistan, including $250m in donations, is its biggest-ever overseas humanitarian aid programme.

Talks between the Chinese and Pakistani premiers have further focused on developing people-to-people interaction, to date the weak link in an otherwise very close relationship.

China on Friday offered 500 university scholarships over the next three years for Pakistani students, with programmes focusing on technological areas of expertise not taught in Pakistan.

The two countries would also exchange high-school students, young entrepreneurs and voluntary social workers.

The new "hearts-and-minds" policy would see Chinese surgeons travel to Pakistan next year to perform cataract operations on 1,000 blind patients.