FTA set to boost trade partnership

By Ding Qingfen (China Daily)
Updated: 2006-11-25 16:27

The China-Pakistan Free Trade Agreement (FTA) which was signed on Friday will not only boost trade ties between the two countries, but will also have a positive impact on China's trade with other countries, according to experts and officials.

The China-Pakistan Economic Co-operation Five-Year Plan was also launched on Friday, which sets a target of US$15 billion for bilateral trade by 2011.

The FTA, which comes into effect on July 1, 2007, mainly covers investment and trade in commodities.

The agreement is China's third, having previously signed FTAs with Chile and the Association of Southeast Asian Nations (ASEAN).

"The FTA creates opportunities, as it will promote exports and investment," commented Commerce Ministry spokesman Chong Quan.

"The time is ripe for both nations to sign the agreement," said Sun Shihai, deputy-director with Asia-Pacific Research Institute at the Chinese Academy of Social Sciences (CASS).

"The Chinese and Pakistani economies greatly complement each other, and the agreement will facilitate the economic development of both countries," said Chen Gang, a senior analyst at Anbound Group Beijing.

Chong added that the FTA will boost Chinese exports of electronics and machinery to Pakistan, while the nation's imports of Pakistani mineral, aquatic and agricultural products are also set to rise.

Bilateral trade between Pakistan and China reached US$4.26 billion in 2005, up 39 per cent year-on-year.

"For China, Pakistan plays an important role in helping it promote its exports worldwide," Chen said.

He suggested that Chinese companies could establish manufacturing facilities in Pakistan, allowing their products to be exported worldwide at a lower cost.

Pakistan plans to set up a Pakistan-China High-Tech Industrial Park, which it expectes to become a major manufacturing base for Chinese companies.

China believes that the FTA could be instrumental in helping reduce its trade surplus with its southern neighbour.

While China-Pakistan trade was worth a total of US$4.26 billion in 2005, only US$832 million of this was from Pakistani exports to China.

"China noticed the surplus, so we have actively promoted the FTA process. During the negotiations, we have offered tax cuts for some Pakistan products. I believe exports from Pakistan will grow as a result," said Chong.

But Sun from the CASS noted that, "the FTA isn't the only solution to the problem. Chinese companies should be encouraged to invest in Pakistan, outsourcing manufacturing there and export products back to China," said Sun.