BEIJING, Jan 31 (INP): The year 2021 is extraordinary for Pakistan and China, not only in that the two brothers are celebrating the 70th anniversary of the establishment of their diplomatic relations, but also in that they are enjoying ever-closer economic ties, says a report published by Gwadar Pro on Monday. Quoting official data from the General Administration of Customs (GACC) of China, the report stated Pakistan’s export to China was increased by 68.9% in 2021, crossing the historical figure of $3.58 billion. Meanwhile, China’s export to Pakistan was increased by 57.8% to $24.23 billion. Over the past ten fiscal years, the bilateral trade between Pakistan and China grew at a CAGR of 10%, according to a KASB report on Performance of Pakistan's Economy in 2021 and Chinese Involvement in Pakistan's Economy released on China Pakistan Agricultural and Industrial Cooperation Platform (CPAIC). In terms of investment, China has been a significant contributor to the Foreign Direct Investment (FDI) in Pakistan, making up nearly 30% of the total FDI in the last 5 years.

In the first 9 months of 2021 and 2020, Power sector has received the largest investment, due to the ongoing CPEC Projects. But even with the bustling economic activities, there are huge demands unmet. According to the KASB report, Pakistan’s imports of goods in FY21 spiked 23% to USD 53.8 bn. Booming industrial and agricultural activities bucking the global trend are pushing import bills higher. Many businesses had secured loans under SBP’s Temporary Economic Refinance Facility (TERF) which were used to import machinery and equipment, the value of which stood at over USD 8.1 bn, an 36% increase y-o-y and an indication of expansion in industrial base. In the agriculture sector, import value for cotton surged by 47% y-o-y to USD 2.5 bn due to a shortage in domestic production caused by adverse weather conditions. Pakistan’s import bill was further boosted by increasing imports of petroleum, soybean, machinery, raw material and chemicals, phones, fertilizers, tyres and antibiotics and vaccines. As a result, PKR depreciated by 7.7% against the USD in Q1 FY 22. The rebound in economic activity and higher international commodity prices kept the Current Account Deficit (CAD) at an elevated level since May 2021. Despite these challenges, Pakistani economy demonstrates promising prospects. IMF has estimated Pakistan’s real GDP to grow by 4%, 4.5% and 5% in FY 22, FY 23 and FY 24 to FY 26 respectively. As CPEC entered phase-two, more investment will be shifted to industrial and agricultural sectors, which hopefully will contribute to filling the gap between supply and demand. Emerging sectors such as e-commerce, 5G communications, electric vehicles, etc. are attracting spotlights. In 2021, e-commerce became the hottest sector in Pakistan with over 11 deals and over USD 42 mn in funding.