Is China Building a $58 Billion Railway From China Border To Gwadar Port?

A report in the Hong Kong-based South China Morning Post (SCMP) last week claimed that a Chinese “government-funded feasibility study” published in a journal recommended the construction of a “$58 billion railway” connecting China’s landlocked Xinjiang region with Pakistan’s Arabian Sea port of Gwadar.

There is, however, a huge problem with this story as it’s played out. It’s almost entirely false.

In reality, there’s been no feasibility study conducted on a China-Pakistan railway network. The $58 billion cost itself is conjecture.

Even if there was one, Pakistan is in no position to afford such a project. And China has no desire to pay for it. Right now, Beijing is struggling to recoup the billion dollars in arrears owed by Islamabad to its Chinese companies that operate power plants in Pakistan.

What follows is the story of how a low-quality article in a Chinese trade publication became fodder for Beijing’s friends and foes. It shows how the China factor draws eyeballs and can be used to trigger clicks, amazement, and fear.

At the moment, Chinese banks are unwilling to finance new projects in Pakistan until the arrears mentioned above are cleared. And Chinese power plants in Pakistan sit idle in part because Islamabad doesn’t have the dollars to pay for imported fuel.

Pakistan is in the midst of a serious economic crisis. Another International Monetary Program is needed. It’ll likely require the restructuring of debt owed to China and other creditors. The idea that Pakistan could possibly take on even more debt — roughly a sixth of its GDP — is simply ludicrous.

Currently, there are no details of the railway route. Only its endpoints — Kashgar in China and Gwadar in Pakistan — are mentioned. The journal article also provides no map.

These details are important because China and Pakistan have been discussing revamping Pakistan’s main railway line — the ML-1 — for roughly a decade. The ML-1 project has been stuck at an advanced stage of negotiations. China and Pakistan are at an impasse over ML-1’s cost and financing terms. The ML-1 doesn’t go anywhere near Gwadar or the border with China. Entirely new lines would have to be built to connect to Gwadar and Kashgar. And their economic viability is questionable.

The fact that the ML-1 goes unmentioned in the journal article is a reflection of its lack of rigor.

 this story probably begins with a general news reporter’s misreading of the content and context of an article in a trade publication.

The reporter’s apparent confusion is to an extent understandable. Some of the co-authors of this journal article work for the China Railway First Survey and Design Institute Group — a state-owned company that would probably conduct the feasibility study for such a railway line.

“Exploring different modes of financing, including equity investments. And so they’re lobbying for all kinds of potential support from the state for their sector.” 

That’s the most likely context in which this study came about. Tellingly, one of the co-authors works in the capital financing department of China Railway FSDI.

Additionally, Pakistan plans to speak with China to reduce the cost of its mega railway project by 40% since it can’t afford such a huge loan, according to its minister. 

The ministry will seek the approval of the federal cabinet and then talk to the Chinese, railways minister Khawaja Saad Rafique said in Lahore on Monday. The two nations agreed to upgrade the 1,163-mile track from Karachi in the south to Peshawar in November. 

Pakistan has been a flagship destination for President Xi Jinping’s Belt and Road initiative with projects worth more than $29 billion completed in the South Asian nation. China-funded power plants, which helped the nation overcome its power deficit, increased its debt burden. About 30% of Pakistan’s foreign debt is owed to China, including state-owned commercial banks, the International Monetary Fund said in a report last year. 

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