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China’s energy investments set stage for BYD’s launch in Pakistan: Will it be a boon?

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Written on Aug 17, 2024
Reading time 4 minutes
  • As Pakistan grapples with its energy dilemma, China has identified an opportunity to further its influence.
  • BYD has chosen to partner with Hub Power Company Limited (HUBC) for its entry into Pakistan.
  • HUBC has a history of collaborating with Chinese firms on power projects.

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China’s deepening ties with Pakistan, which date back to the early 1950s, have evolved into a multifaceted partnership, particularly under the Belt and Road Initiative (BRI).

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This relationship, rooted in mutual strategic interests, has led to significant Chinese investments in Pakistan’s infrastructure, with a notable focus on the power sector.

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As the Chinese electric vehicle (EV) giant BYD prepares to enter the Pakistani market, the stage is set for a new chapter in this bilateral relationship—one that could potentially reshape Pakistan’s energy landscape and economic future.

China’s power investments in Pakistan

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The China-Pakistan Economic Corridor (CPEC), a flagship project under the BRI, has seen China pour billions into Pakistan’s infrastructure, including its power sector.

Over the past decade, these investments have led to the installation of power plants across the country, boosting Pakistan’s total installed capacity to 42,000 MW.

However, this expansion has not been without its challenges.

Despite the increased capacity, Pakistan’s economic slowdown has significantly reduced its power consumption, with peak usage barely reaching 20,000 MW.

This disparity has created a financial burden for Pakistan, as the country is obligated to make capacity payments for the full 42,000 MW, regardless of actual usage.

The situation has been exacerbated by the near-standstill in economic activity over the past two years, leaving Pakistan to bear the cost of underutilized energy infrastructure.

In a bid to manage this burden, Pakistan’s Finance Minister Aurangzeb recently negotiated the rescheduling of loans taken to finance these power projects.

At one point, Pakistan owed nearly $2 billion to Chinese power companies operating in the country.

The rescheduling of these debts has provided temporary relief, but the underlying issue of excess capacity remains unresolved.

BYD’s entry: A new chapter in Pakistan-China relations?

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As Pakistan grapples with its energy dilemma, China has identified an opportunity to further its economic influence.

BYD, one of the world’s leading EV manufacturers, is set to launch its vehicles in Pakistan today, marking a significant milestone in the country’s automotive industry.

This move is not just about selling cars; it represents a strategic utilization of Pakistan’s excess energy capacity.

BYD has chosen to partner with Hub Power Company Limited (HUBC) for its entry into Pakistan.

HUBC, through its subsidiary Mega Motors Limited, has a history of collaborating with Chinese firms on power projects.

The company previously worked with China Power Hub Generation Company to establish two thermal power plants in Pakistan and has also partnered with China National Machinery Industry Corp (Sinomach) to develop additional power plants in the country.

Sinomach, which recently completed BYD’s factory in Thailand, is expected to play a key role in setting up BYD’s operations in Pakistan.

Whether BYD will establish an assembly or manufacturing facility remains unclear, but one thing is certain: China’s involvement in Pakistan’s power sector ensures that energy availability will not be a constraint.

Continuation of China’s influence over Pakistan?

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BYD’s entry into Pakistan, backed by China’s extensive investments in the power sector, could be seen as a strategic move to make full use of the country’s existing infrastructure.

While some may view this as a continuation of China’s influence over Pakistan, others might argue that it offers a solution to Pakistan’s energy surplus by driving industrial growth and economic activity.

However, this development also raises questions about the long-term impact on Pakistan’s economy and sovereignty.

While China’s investments provide much-needed infrastructure and industrial growth, they also increase Pakistan’s financial obligations and deepen its dependency on its powerful neighbor.

As BYD launches its vehicles in Pakistan, the public is eager to see how this new chapter unfolds.

Will it be a boon for Pakistan’s struggling economy, or will it further entrench the country in a cycle of debt and dependency? Only time will tell.

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