Economics (AS & A Level) · May / June 2023 · Paper 42 · Question 1

Pakistan and the Belt and Roads Initiative (BRI) The BRI is a strategy initiated by China in 2013 that seeks to connect Asia with Africa and Europe via land and sea networks. Its aim is to improve regional integration, increase trade and stimulate economic growth. It involves major investment in infrastructure projects. Under the BRI China is looking for markets with growth potential for their exports, in particular openings for profitable infrastructure and industrial investment. Profits in China are falling and over-capacity is widespread. Better direct transport links will encourage growth for China’s inland provinces, for example, the China-Pakistan Economic Corridor (CPEC). This is a US$50 billion road building scheme linking an inland province in western China to a newly developed Pakistani port on the Arabian Sea. The development offers a shorter and cheaper route for China’s exports to Africa, the Middle East and Europe. Additionally, the port development includes plans for investment in Pakistan’s railways and industrial zones. Other projects are focused on energy supply including coal-fired and nuclear-powered electricity generation and the development of Pakistan’s electricity grid. Pakistan’s economy is affected by power cuts which lead to many firms having their own inefficient diesel generators that increase their costs of production. The generators are also highly polluting. A more reliable electricity supply will also benefit households as cooking can be done without using unhealthy solid fuels, such as straw, and students can study for longer in the evening. The construction machinery used for these infrastructure projects is supplied mainly by China and the projects are supervised by Chinese managers. To pay for these projects Pakistan takes loans provided by Chinese banks and institutions. Pakistan already has outstanding foreign debt of approximately 25% of gross domestic product (GDP). Table 1.1 Selected Comparative Data for China and Pakistan GDP per capita adjusted for purchasing power parity (US$) Unemployment Rate (%) Gini Coefficient 2014 2018 2014 2018 2014 2018 China 11 917 15 243 4.1 3.8 43.7 38.5 Pakistan 4171 4740 5.8 5.5 29.8 33.5

Read automatically from the paper; the printed page above is exact.