During a visit by Pakistan’s Interim Commerce Minister Gohar Ejaz and a 20-member delegation to China, the Chinese government has shown willingness to consider amending the existing Free Trade Agreement (FTA). The discussions included provisions for supplying trade finance in yuan and offering loans to support the relocation of industries to Pakistan.
As part of the revised FTA, both countries aim to extend preferential treatment to Pakistani products, aligning them with the agreement China has with the Association of Southeast Asian Nations (ASEAN) countries. Minister Gohar Ejaz mentioned that a priority list would be submitted after consulting with stakeholders, and the Chinese counterpart has already expressed agreement with these requests.
Formally approaching the Chinese government, Pakistan has urged them to allocate a substantial sum of $5 billion, equivalent to RMB, for financing investments intended to facilitate the relocation of Chinese companies. The proposed funding structure follows a “Pay as You Earn” framework, allowing repayment through the use of export proceeds.
The relocation of Chinese companies is limited to Special Economic Zones (SECZ) or Export Processing Zones (EPZ) in Pakistan. Chinese investors are expected to seek investment funds from their government and generate revenue in US dollars through exported goods, with these proceeds utilized for loan repayment.
Minister Gohar Ejaz assured that the proposed scheme would not impact Pakistan’s foreign exchange reserves, providing relief from potential burdens. Additionally, both nations agreed to make $5 billion, equivalent to 30 billion RMB, available for immediate trade finance, with the Chinese currency being employed for exports and imports to reduce dependence on US dollars.
To further enhance trade relations, both sides also agreed to align import valuation data, aiming to eliminate discrepancies in trade figures. This multifaceted agreement reflects a cooperative effort to strengthen economic ties between China and Pakistan.
