Cheng Xizhong, Visiting Professor at Southwest University of Political Science and Law，Special Commentator of China Economic Net and former Chinese Defense Attache in South Asia

China and Pakistan are to sign the second phase Free Trade Agreement（FTA）today, which is due to be effective on July 1st this year.

Since the signing of the second phase agreement will facilitate Pakistani exports to China, and further strengthen the trade and economic relations between China and Pakistan, naturally the trade volume between the two countries is expected to enjoy a dramatic increase.

The following points should be highlighted when interpreting China-Pakistan trade and economic relations:

First, the free trade rate between China and Pakistan will exceed 90% after the signing of the second phase FTA. It surpasses the free trade rate between China and ASEAN countries, which is about 90%. This reflects China's special care for Pakistan.

Second, China has been Pakistan's largest trading partner, largest source of import and third destination country of export. However, China's export to Pakistan accounts for less than 1% of China's aggregate export volume. As a big country with a population of 1.4 billion, China serves as a huge consumption market for Pakistani goods.

Third, China is experiencing a huge trade surplus with Pakistan for the time being. However, it should be noted that, due to the construction of the China-Pakistan Economic Corridor (CPEC) and Pakistan’s socio-economic development, China is investing a large amount of capital, human resources and transferring technologies to Pakistan, which is conducive to boosting its economy and expediting the process of industrialization. In this condition, the deficit will shrink gradually.

Fourth, with the continuous progress of the CPEC projects, particularly in terms of thriving Special Economic Zones (SEZs) and industrial parks, more and more foreign investments will flock into Pakistan, providing a valuable opportunity to improve its manufacturing and export capacity.

Fifth, it can be predicted that realizing the trade balance between China and Pakistan is just a matter of time. Once Pakistan is more economically integrated with China and even the world, it will step in a fast track of development. Accordingly, The current problems of foreign currency shortage, economic difficulties, financial crisis and trade imbalance in Pakistan will be effectively solved.

(Cheng Xizhong, Visiting Professor at Southwest University of Political Science and Law，Special Commentator of China Economic Net and former Chinese Defense Attache in South Asia)