Pakistan clings to China after the US snubs it. Decision follows Trump's announcement of aid cuts. China tightens its hold over Pakistan's economy

On January 1, the US President Donald Trump announced on Twitter that his government would be curtailing aids to Pakistan. On January 3, Pakistan dug out a six year old agreement with China - buried ever since - to virtually jump into Chinese fold of Geo-economics.

The transition of Pakistan's economy from being dependent on the American aid to becoming an extended arm of Chinese economy seems to have entered the final lap with the State Bank of Pakistan announcing on Tuesday that public and private sector enterprises are allowed to use the Yuan for bilateral trade and investment.

The currency swap agreements are nothing new in international business and commerce but the case is different with Pakistan and China due to overbearing dominance of Beijing over Islamabad.

CURRENCY SWAP AGREEMENT

A currency swap agreement was signed between China and Pakistan when Yousaf Raza Gilani was the prime minister in Islamabad. The currency swap agreement remained buried till early this week when Pakistan's Foreign Office announced that the two countries would "actively" use each other's currencies for trade and investment.

The State Bank of Pakistan's statement just followed it up. While Chinese traders have made their opposition known in accepting Pakistan's currency, China is insistent on using yuan in Gwadar Economic Zone besides the China Pakistan Economic Corridor.

The revival of currency swap agreement has come as part of the Long Term Plan 2017-30 devised and designed by China.

The Long Term Plan states that the two countries will promote "the multi-currency direct Financing of Pakistan's central and local governments, enterprises" and also the "financial institutions in China". It also spells out a pledge by China and Pakistan to support enterprises carrying out direct financing for projects along the CPEC.

The institutions involved under this plan include stock markets, central banks and almost all the institutions that deal with finances. This is a plan of cooperation between a predator, China and a prey, Pakistan. It is a nothing less than a complete surrender of Pakistan's economic sovereignty to China or a Chinese takeover of Pakistan.

WHY IT IS A CHINESE TAKEOVER

The China Pakistan Economic Corridor (CPEC) plan came in public domain in May last year. The provisions detailed in the plan make it an alarming proposition for Pakistan.

The CPEC plan says that "thousands of acres of agricultural land will be leased out to Chinese enterprises" and "a full system of monitoring and surveillance will be built in cities from Peshawar to Karachi with 24 hour video recordings on roads and busy marketplaces for law and order."

The CPEC project was initially projected at a cost of USD 46 billion. Its cost has now increased to around USD 60 billion. Majority of it would be invested in Pakistan in the form of a loan, which Islamabad would require to pay back. Most of the loans attract an interest rate of two per cent.

According to one estimate Pakistan may be required to pay USD 5 billion a year in the form of debt repayment to China. A repayment of this scale is unthinkable for a debt-ridden Pakistan.

For such situations of default on repayment, Chinese policy has been of physical takeover of strategic assets and agricultural lands - as exhibited in Africa and Sri Lanka's Hambantota port. Pakistan's fragile economy is the perfect recipe for Chinese new age imperialism.

TRANSITION FROM US FOLD TO CHINESE LAP

Pakistan's shift from the American side to Chinese side is marked by gradual dominance of Beijing over Islamabad as well as the US' growing frustration with it.

America's frustration could not have been expressed in clearer terms than by its President Donald Trump, who wrote on Twitter on the New Year: The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years.

"They have given us nothing but lies and deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more," announced Trump.

This was followed by the suspension of over USD 1.15 billion security assistance to Pakistan for not taking "decisive actions" against terror groups operating from its soil.

However, the US action also gave Pakistan an alibi to embrace Chinese plan boldly. The US investment has been a trifle in comparison to Chinese infusion of Renminbi in Pakistan last year. China has invested USD 837 million in Pakistan in 2017 against USD 42 million by the US.