China denies seeking additional guarantees for $6 Billion loan for CPEC project in Pakistan amid rising corruption, militant attacks

China on Monday termed as baseless the reports that it has sought additional guarantees from Pakistan for sanctioning a whopping USD 6-billion loan for a railway line project and backing away from its initial financial commitments to the multi-billion dollars China-Pakistan Economic Corridor due to weakening financial position of its all-weather ally. Chinese Foreign Ministry spokesman Zhao Lijian also rejected reports that China was backing away from its initial financial promises to Pakistan under the USD 60 billion CPEC amid rising corruption and militants’ attacks.

“These reports are baseless,” Zhao told a media briefing here. “I would also like to stress that against the global economic recession, China’s input in the Belt and Road Initiative (BRI) including the CPEC has not reduced but rather increased against the odds,” he said.

“Over the first three quarters, China’s direct financial investment in BRI countries increased by around 30 per cent, offering China’s support to many BRI partner countries in their effort to fight the epidemic and recover their economy,” Zhao said. The CPEC, which connects Gwadar Port in Pakistan’s Balochistan with China’s Xinjiang province, is the flagship project of China’s ambitious multi-billion-dollar BRI. India has expressed concern over the project as a portion of the CPEC runs through Pakistan-occupied Kashmir.

Pakistan’s media recently reported that China has sought additional guarantees before sanctioning a USD 6-billion loan for the Main Line-1 (ML-1) railway line project due to Islamabad’s weakening financial position. The ML-1 project, which includes dualisation and upgradation of the 1,872-km railway track from Peshawar to Karachi, is a major milestone for the second phase of the CPEC.

The Express Tribune newspaper had reported that China also proposed a mix of commercial and concessional loans to fund the rail project, going against Islamabad’s wishes of cheapest lending. A senior Pakistani official involved in the negotiations said that China raised the additional guarantee issue during the third joint ML-1 Financing Committee Meeting on December 13 but did not make it a part of the draft of minutes shared with Pakistan.

The official said that China raised the additional guarantee issue to get clarity over Pakistan’s financial condition after it applied for debt relief from the G-20 countries, which is only meant for the world’s poorest nations.