Understanding the risk of putting all its eggs in US Treasuries, China is now eager to diversify its reserves. About two weeks back its premier Wen Jiabao said his country should buy more "long-term corporate real assets" rather than short-term financial ones.
Foreign media reports suggest that by long-term corporate real assets, Jiabao implied resource companies with focus on the emerging world - in line with its "Going Out" strategy, enacted by the Chinese government in 2004. The strategy refers to the official promotion of foreign investments and business co-operation outside of China.
"We should hasten the implementation of our Going Out strategy and combine the utilisation of foreign exchange reserves with the Going Out of our enterprises," he was quoted as telling Chinese diplomats in a Financial Times report. So if Jiabao is really serious about his plans then whats keeping him away from Pakistan? We might not be an emerging economy by definition but we surely have what China wants.
When the energy hungry Asian tiger can reach out as far as Africa then it can surely come down to Pakistan. We offer the same success ratio in oil and gas exploration, if not more; we offer geographical proximity and we are nation that is, by and large, quite hospitable to Chinese people.
The United States might have an issue here, some critics say, but considering the recent developments in the Sino-US relationship these fears are a bit overblown. The United States now understands very well that China cannot be subdued. Therefore, the real thorn in wooing Chinese investments into Pakistans energy and trade/transporation businesses is the fragile law and order situation across Pakistans western belt.
And thats one aspect our officials need to work on, pronto. Does anybody have any idea how much economic loss we incur each year just because of this Balochistan issue? More on that later, perhaps, but for now lets focus back on attracting Chinese money. So far there hasnt been any mention of China specific investment policy. But with China looking for real assets abroad, our policy wonks in Islamabad should be seriously pondering over how to tap the opportunity. Besides, Chinese contribution in our FDI inflows has been dismal.
Such a policy should focus on attracting China in energy either by selling stakes in exploratory firms or by allowing them to make direct investments in the sector. Likewise, our transport and trade sector offers plenty opportunities. A founding stone in this context has already been laid by the previous government, now all our officials have to do is to remove the hurdles and cement it by marrying the interests of both countries.
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