land in Pakistan
Pakistan’s finance minister Ishaq Dar (left) with Chinese ambassador to Pakistan Sun Weidong after signing the Pakistan Stock Exchange deal
Money-Advice-Trust

Chinese companies are in talks to snap up more businesses and land in Pakistan after sealing two major deals in recent months.

The development is a sign of deepening ties after Beijing vowed to plough $57 billion (£46bn) into a new trade route across the south Asian nation.

A dozen executives from some of Pakistan’s biggest firms said Chinese companies were looking mainly at the cement, steel, energy and textile sectors, considered the backbone of Pakistan’s $270bn (£216bn) economy.

Analysts say the interest shows that Chinese firms are using Beijing’s “One Belt, One Road” project – a global trade network of which Pakistan is a key part – to help expand abroad at a time when growth has slowed at home.

A Chinese-led consortium recently took a strategic stake in the Pakistan Stock Exchange, and Shanghai Electric Power acquired one of Pakistan’s biggest energy producers, K-Electric, for $1.8bn (£1.4bn).

“The Chinese have deep pockets and they are looking for major investment in Pakistan,” said Muhammad Ali Tabba, chief executive of two companies in the Yunus Brothers Group cement-to-chemicals conglomerate.

Tabba said Yunus Brothers, in partnership with a Chinese company, lost out in the battle for K-Electric, but the group is eyeing up other joint ventures as part of a $2bn (£1.6bn) expansion plan over the coming years.

Mohammad Zubair, Pakistan’s privatisation minister until a few days ago, said that China’s steel giant Baosteel Group is in talks over a 30-year lease for state-run Pakistan Steel Mills. Baosteel did not respond to a request for comment.

The negotiations come as Pakistani business sentiment turns, with companies betting that Beijing’s splurge on road, rail and energy infrastructure under the China-Pakistan Economic Corridor (CPEC) will boost the economy.

The Chinese interest is in contrast to western investors, who have largely avoided Pakistan in recent years despite fewer militant attacks and economic growth near five per cent.

It is welcomed by many in Pakistan – foreign direct investment was $1.9bn (£1.5bn) in 2015-2016, far below the 2007- 2008 peak of $5.4bn (£4.3bn).

At the stock exchange signing ceremony, Sun Weidong, China’s ambassador to Pakistan, said the deal “embodies the ongoing financial integration” between Chinese and Pakistani markets.

“This will facilitate more financial support for our enterprises,” Sun said.

CPEC will connect China’s Western region with Pakistan’s Arabian Sea port of Gwadar through a network of rail, road and pipeline projects. That will be funded by loans from China, and much of the business will go to Chinese enterprises.

The scale of Chinese corporate interest beyond that is difficult to gauge, but in Karachi, Pakistan’s financial centre, sharply-dressed Chinese appear to outnumber westerners in hotels, restaurants and the city’s airport.

Rising skyscrapers testify to a construction boom in the city, businesses are printing Chinese-language brochures and salaries demanded by Pakistanis who speak Chinese have shot up.

Miftah Ismail, chairman of Pakistan’s Board of Investment, said Chinese companies were interested in investing in the telecoms and auto sectors, with the FAW Group and Foton Motor Group planning to enter Pakistan.

FAW said the Pakistan “project is going through internal approvals”, but did not offer more details. Foton declined to comment.

But not everyone is excited by China’s growing role in the Pakistan economy, including trade unions, who said Chinese companies’ alleged mistreatment of local workers in Africa in the past alarmed them.

“We have concern and reservations that the Chinese may use the same methods in Pakistan,” said Nasir Mansoor, deputy general secretary of National Trade Union Federation, Pakistan, the national body.

The Chinese government and Chinese companies have dismissed such accusations in the past.

Meanwhile, Islamabad and Beijing are discussing the next phase of CPEC – how to build Pakistan’s industry with the help of Chinese state-owned industrial giants.

Pakistani officials are drafting plans for special economic zones which would offer tax breaks and other benefits to Chinese businesses.

But even before zones are established, Chinese investors are scoping out land deals.

“A lot of companies … don’t care about CPEC. They just want 500 acres of land to set up shop,” said Naheed Memon, head of the Sindh province’s Board of Investment.

Faisal Aftab, manager of private investment firm Oxon Partners, said Oxon was in talks with two state-run Chinese companies and a wealthy Chinese businessman to purchase and develop land for high-end residential and commercial properties.

“They are seeking land in prime markets such as Lahore, Karachi, and Islamabad,” Aftab said.