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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
largest trading partner in south Asia, while China is Pakistan's fourth largest trading
partner, second largest source of imports and seventh largest exporting market (Free
Press Release, 2010). Political relationship between the two countries has extended to
economic and business fields and working for further expansion in the prospective area
of corporation. Pakistan President Asif Ali Zardari (2009) wrote in a op-ed ―no
relationship between two sovereign states is a unique and durable as that between
Pakistan and China‖.
Trade between China and Pakistan had generally been conducted under 1963 trade
agreement, which conferred the Most Favored Nation (MFN) status to each other
countries. Initially, Pakistan had multi-model trade with China i.e. barter trade and cash
trade. However, trade with China is conducted almost entirely on cash basis in
convertible currency. There has been a steady increase in Pak-China trade in the previous
years (Rehman, 2008). Since Pakistan needed high tech items for its developing
economy, major imports from China are consisted of machinery, spare parts, iron and
steel products, sugar, chemical, medical and pharmaceuticals. The main exports from
Pakistan to China are cotton fabrics, cotton yarn, petroleum and its products, fish and its
preparation, leather, fruits and vegetables (Mohuddin, 2007). The range of products
Pakistani exported to China is a limited one which lack diversity while both the countries
are competitors in the textile sector exports. Adding variety to Pakistani exports other
than non traditional items could lead to reduce the trade imbalance. Chinese products are
more economical so businessmen are inclined to buy more from China which results in a
huge trade deficit for Pakistan. China is not simply an export market for Pakistan but it is
reliable source of import of capital food and industrial raw materials(Rehman, 2007).
Pakistan and China, expressing determination to further elevate their all-weather
friendship(Embassy of China, 2007).
2. Pak-China Trade Ties
The economic and military bilateral relation between Pakistan-China bilateral relations
have been given more importance since former President Musharraf assumed powers in
1999 and its going smooth also in Zardargi‘s regime. Both administrators make emphasis
on economic development in Pakistan resulted in more economic and military
cooperation with China. The Chinese government always responded positively by show
their state to do more business with Pakistan in the wake of its political and strategic
interests in Pakistan and encouraging private sector in same direction. So last ten-twelve
years observed significant increase in bilateral economic relation reciprocated by political
and strategic relations. The article studies the agreements signed during 1999-2010 and
their nature, moreover, volume of trade and investment between these two countries.
Given the potential for the growth of the trade and economic cooperation between the
two countries, China has become the largest trading partner of Pakistan. Mr Ma Yue, the
Chairman of China‘s council for the promotion of international trade agreed to expand
bilateral trade and economic cooperation between the two nations during his visit to
Islamabad in April 2000. China also agreed to transfer technology for improving the
performance of Pakistani industries working with obsolete machinery like Pakistan Steel,
Railways etc.
Chinese Prime Minister Zhu Rougji‘s official visit to Pakistan in May 2001, the volume
of bilateral trade continued to grow from US $ 1.4 billion in 2001 to US $ 3 billion in
2004, which further raised to $ 4.25 billion in 2005 to $ 5 billion in 2006(Khan, 2006),
COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 158
JANUARY 2011
VOL 2, NO 9