During the past four years, investment from China has continuously risen in different sectors of the Pakistani economy. More than three dozen Chinese companies are operating in the oil-and-gas, information-technology, telecommunications, power-generation, engineering, automobile-manufacturing, infrastructure and mining sectors. In Karachi, as many as 30 Chinese companies and about 400 Chinese engineers are participating in various projects.

Scores of formal agreements have increased the total trade volume between Pakistan and China from less than $1 billion in 2000-01 to about $5 billion by the end of 2006.

Beijing believes there is vast potential for Chinese companies to invest in various sectors of Pakistan's economy. During a visit to China by Pakistani Prime Minister Shaukat Aziz in 2004, Islamabad announced "free market economy" status for China, and Beijing pledged to provide $150 million for Chashma Nuclear Power Plant (Phase II).

Under the FTA signed last week, Pakistan will gain access to the vast Chinese market, while China will sell Pakistan more and more goods, as well as get cheap raw materials and the use of Pakistani ports for the onward export of its goods to world destinations at reduced freight rates.

The biggest chunk of Chinese investment in Pakistan is being spent on development projects in the country's largest province, strategically located Balochistan. The most important projects being launched with Chinese assistance in Pakistan include construction of the Gwadar deepsea port in Mekran, the Saindak copper and gold project in Chaghm, and the lead-zinc-mining project in Balochistan's Lasbela district.

The Chinese have invested about $230 million in the Gwadar port and the Saindak copper project, which is more than 50% of their total investment in the country.

At present, Chinese firms and engineers are helping develop key sectors of the Balochistan economy, including infrastructure, mining, and oil and gas exploration. Chinese companies working in Balochistan include Tianjin Zhongbei Harbor Engineering Supervision Corporation of China, China Harbor Engineering Company Group (CHECG), Metallurgical Construction Corp and its subsidiary MRDL, and the Bureau of Geophysical Prospecting.
Some security analysts believe that the real motive behind China's provision of technical assistance, personnel and funding for the construction of the Gwadar port is that it wants to turn it into a transit terminal for Iranian and African crude-oil imports.

As a long-term strategic asset, the port could provide access for its navy to patrol Indian Ocean sea lanes, as well as an alternative land-based route for crude-oil imports.

The Chinese stake in Gwadar has been growing since construction of the seaport began in March 2002. The total cost of the project is estimated at $1.6 billion. China has so far contributed about $198 million and Pakistan has allocated $50 million.

China has also spent $200 million building a coastal highway connecting Gwadar port with Karachi.

The first phase has been completed by the CHECG. During Pakistani Prime Minister Shaukat Aziz's China visit in December 2004, an agreement with Beijing was signed for the dredging of the Gwadar port channel up to a depth of 14.7 meters, allowing big vessels access to the port.

A proposal for the establishment of Gwadar Economic and Energy Zone (GEEZ) is being considered. The proposed zone will comprise an oil refinery, liquefied-natural-gas terminals and petrochemical sites. The two countries will set up a joint-venture consortium to finalize the preferential policy and tax-incentives package for the establishment of GEEZ.

China has also expressed interest in constructing an oil refinery in Gwadar. As Pakistan's biggest, it would refine 60,000 barrels per day. A feasibility study is being considered by Islamabad and Beijing for an oil pipeline from Gwadar port to western China to transport China's oil imports from the Persian Gulf rapidly. During his last visit to China in February, Pakistani President General Pervez Musharraf offered a "trade corridor" to meet Beijing's energy requirements. Pakistan would help China with the construction of the strategic pipeline from Gwadar to its borders, enabling it to import oil from Saudi Arabia.

On the security front, the Chinese have paid heavily for investing in Balochistan. A military operation is being undertaken to quell a rebellion by Baloch militants in the province. In May 2004, three Chinese engineers lost their lives in an act of terrorism in Gwadar. In the first quarter of this year, two Chinese engineers were killed in an act of terrorism in the Hub area of Balochistan.

Some experts believe that the FTA is unlikely to increase bilateral trade volume to $15 billion, as Pakistan still needs to do a lot to improve internal security, promote its exports and encourage its business community to invest in China.

Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based development analyst in Pakistan. He is the author of six books, including The Economic Development of Balochistan, published in May 2004.

(Copyright 2006 Asia Times Online Ltd.)

The Chinese demining mission in Lebanon is a small sign of Beijing's rapidly expanding engagement in the Middle East, where its voracious quest for secure energy supplies in the 21st century has sharpened its interest in regional stability.

China is striving to build economic and political ties in a region which the International Energy Agency expects to supply 70 percent of its oil imports by 2015, but in doing so it risks antagonizing its key trading partner, the United States.

For China woos U.S. allies such as Saudi Arabia with the same fervor it uses to court Iran, Syria and Sudan -- all at odds with the West and seen by Washington as "sponsors of terrorism."

From Tehran to Rabat, few capitals seem worried by China's growing weight, at least as a trading power, in a region where it had a low profile before becoming a net oil importer in 1993.

"Hegemony, domination, imperialism are associated with the United States and Europe. China is not seen that way," said Sami Baroudi, a Lebanese political scientist. "Arabs appreciate its economic might, but don't see it as a political threat."

NO QUESTIONS ASKED

Ruling elites in Iran and the Arab world appreciate China's eagerness to do business without fussing about human rights and democracy. They prefer Beijing's calls for international dialogue on conflicts such as the Iran nuclear dispute to the unilateralist and militarist urges of the U.S. administration.

Even those close to the West are frustrated by Washington's support for Israel, the chaos created by its Iraq invasion and its threats to those defying its plans to reshape the region.

Many also welcome China's stress on national sovereignty, one reason for its opposition in the U.N. Security Council to the Iraq war and more recently to tough trade sanctions against Iran or U.N. military intervention in Sudan's Darfur region.

Baroudi argues that ordinary Middle Easterners, not just their rulers, admire China for its explosive economic growth, which many believe -- rightly or wrongly -- has occurred without sacrificing social justice, law and order or traditional values.

In Egypt, a recent government poll showed China as the most favorably viewed non-Arab country, with 73 percent of Egyptians seeing it as friendly and only 4 percent as hostile.

"China has no colonial ambitions in the past or now and it has emerged as an economic power with an interesting experience so in Egypt there is a strong tendency to establish relations in economic cooperation and energy projects," said Abdel-Raouf el-Reedy, who chairs the Egyptian Council on Foreign Relations.

Syrian President Bashar al-Assad, who briefly allowed a climate of debate after he took power in 2000, soon made clear that reform of the state-dominated economy would take priority over political change in a policy that his liberal critics said was inspired by the "Chinese model."

Those critics argued that China, unlike Syria, had axed its "old guard" and had generated huge economic opportunities, whereas Damascus could offer nothing comparable to deflect demands for political, social and judicial reforms.

COUNTERWEIGHT TO AMERICA

Assad has looked openly to China to carve out a bigger role in the Middle East after the demise of Syria's Soviet ally.

"China is now a superpower and is very important after the absence of the Soviet Union," he was quoted as saying in 2004.

For Saudi Arabia, China is also a counterweight to U.S. dominance, not just a booming market for oil and investment.

The kingdom, the birthplace of Islam and former bulwark against what it saw as the threat posed by atheist Chinese communism, has embraced Beijing partly to offset strains in its longstanding alliance with the United States which became acute after the September 11 attacks and which have not fully dissipated.

King Abdullah chose China for his first trip abroad as Saudi monarch in April and described it as a "truly friendly country."

China's combination of political control and economic growth has attractions for Saudi Arabia and other Gulf oil producers, buoyed by a vast oil price windfall they can use to assuage discontent with autocratic rule and reduce religious militancy.

In Iran, China is welding an ambitious economic relationship that it is struggling to insulate from any disruptions sparked by the international nuclear dispute with the Islamic Republic.

China has consistently urged peaceful diplomacy, but Tehran cannot assume it will use its Security Council veto to block eventual U.N. sanctions for its pursuit of a nuclear fuel cycle.

Even if sanctions threaten immense harm to the web of energy and other deals China has spun in Iran, Beijing has far greater trade interests in the West, especially the United States.

NO ILLUSIONS

Aware of such constraints on China, as well as its newcomer status and lack of military muscle in the Middle East, Iranians and Arabs have few illusions that Beijing is able or willing to challenge U.S. primacy, at least in the short run.

"China has been kow-towing to the United States (because of its economic interests) and will do until at least the middle of the next decade," said Mohamed el-Sayed Said, an analyst at Cairo's al-Ahram Center for Political and Strategic Studies.

"Also Chinese diplomacy is totally pragmatic and the China of the future may not be a better partner (than Washington)."

For now, China's growing reliance on Middle East energy has given it a vital stake in regional stability -- including non-proliferation of nuclear and unconventional weapons.

It has reined in sales of arms and military technology to the Middle East that marked earlier decades and it shares U.S. concern about al Qaeda, especially the group's backing for Muslim militants in its own northwestern Xinjiang Uighur region.

Since 2002, China has even had its own envoy working on Arab-Israeli peace, although without perceptible success.

"China is emerging as a more influential political power and their attitude is always based on dialogue," Reedy said.

Beijing has become more involved with U.N. efforts to mitigate Middle East conflicts, joining pre-war arms inspections in Iraq and this year the U.N. peacekeeping mission in Lebanon.

The Chinese have cleared thousands of cluster bombs and other ordnance -- including the bomb 2nd Sergeant Liu was tackling in Zebqin -- since the Israeli-Hezbollah war ended on August 14, winning them a degree of affection from Lebanese villagers.

"The people are quite friendly because they know we're doing something for them," says liaison officer Major Xu Hongcai.

"The ball is very much in the North Korean court," Hill told reporters during a brief stopover at Tokyo airport after meetings in Beijing with his North Korean and Chinese counterparts.

"The problem is not setting a date. We can set a date any day -- that's not a problem. The problem is getting to the talks and making progress."

"They must get out of the nuclear business and into the NPT," he said, referring to the Non-Proliferation Treaty, which North Korea quit in 2003.

North Korean envoy Kim Kwe-gwan was amicable, but adamant about not giving up the country's nuclear programs.

"The results to come will eventually surface after time goes by, and that is part of the diplomatic progress," he told reporters after a meeting with South Korea's envoy in Beijing.

"... about giving up nuclear weapons, we cannot unilaterally give them up," he added.

Hill said his team, "working with the Chinese consistently throughout", had shared ideas with the North Koreans. The U.S. embassy -- referring to North Korea by its official acronym -- said: "The DPRK promised to study these ideas".

"NOTHING NEW"

"We have given them ideas for how we can proceed. I invited Mr Kim Kwe-gwan to give me ideas if he had any. Unfortunately he did not have anything new," Hill said.

In Washington, the Bush administration kept up pressure on Pyongyang, listing luxury items it would seek to block under U.N. trade sanctions, including cognac, cigars and jet skis.

"While North Korea's people starve and suffer, there is simply no excuse for the regime to be splurging on cognac and cigars," Commerce Secretary Carlos Gutierrez said.

"We will ban the export of these and other luxury goods that are purchased for no other reason than to benefit North Korea's governing elite," he added in a written statement.

Kim has long been known for his fondness for cognac and is said to have a wine cellar with space for 10,000 bottles.

U.S. officials argue that if the elite directly feel the sting of international outrage, it could loosen Kim's control.

"It's a creative idea. Somebody's got a sense of humor over there" at the Commerce Department, said William Reinsch, a former senior Commerce Department official who administered trade restrictions with North Korea for former president Bill Clinton.

"I don't think it'll do any good, but it'll certainly send a message," he said.

The U.N. Security Council has already voted to ban military supplies and weapons shipments, echoing sanctions already imposed by the United States. It also prohibited sales of luxury goods but left each country to define such items.

South Korea's Yonhap news agency said Pyongyang wanted sanctions dropped and Washington to free the North's overseas bank accounts as preconditions for ending its nuclear program.

U.S. officials have said they want North Korea, without condition, to stand by an agreement last year to abandon all nuclear weapons and nuclear programs. In return, the other nations held out economic, political and security incentives.