Since President Xi Jinping launched China's "One Belt, One Road" initiative in 2013, there has been argument that the initiative's purpose is to offlload outdated products and shift domestic overcapacity to other countries and regions. However, in Pakistan, company executives charged with developing infrastructure projects for the China-Pakistan Economic Corridor (CPEC) - one of the initiative' signature projects - say that the criticism doesn't hold up to scrutiny. Global Times reporter Chu Daye spoke with these executives in Lahore, Pakistan, about the issue.

Telecommunication advertisements dominate a street corner on June 21 in Lahore, Pakistan's second largest city. Photo: Li Hao/GT

The notion that China is trying to export its outdated capacity to countries and regions along the "One Belt, One Road" initiative is not objective, the builders of the China-Pakistan Economic Corridor (CPEC), told the Global Times in mid-June.

CPEC would greatly boost connectivity between China and Pakistan, its builders said.

Reportedly involving investment of up to $46 billion, the CPEC is a flagship project of China's "One Belt, One Road" initiative, which refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road - both launched by President Xi Jinping in 2013.

Under the initiative, China aims to support partner countries along the routes in developing infrastructure.

The myth about outdated capacity

There have always been critics who have said that China's initiative to go abroad aims to dump products that cannot be consumed by the domestic market and relocate its outdated capacity overseas.

The sectors suffering a supply glut in China are primarily cement, steel, aluminum and flat glass. These industries have seen their profit margins get squeezed to near zero due to a wide range of factors including excess investment in production capacity and fierce competition.

However, experts and company executives in Pakistan told the Global Times that the allegations that China is trying to dump products or production capacity in Pakistan do not hold much weight.

"If you rewind the clock, and examine how China became the 'factory of the world' after all the big multinationals began to set up plants in the country, you will find such a saying has its logic. However, the telecom sector is an exception," said Han Song, chief marketing officer of Zhongxing Telecom Pakistan, the Pakistan branch of Chinese telecommunication giant ZTE Corp.

The telecommunication business has continuously evolved with the times and the latest technology, Han told the Global Times.

"If a telecommunication technology is outdated in China, it is outdated elsewhere, too. There is no point in exporting an outdated technology abroad because no consumers will like or use it," Han said. "Perhaps we did not bring some of the best technologies from China to the Pakistan market because they are too expensive to match local demand, but basically I would say Pakistan and China are on the same level from a technology evolution point of view." 

China issued 4G licenses in December 2013. The Pakistani government concluded its auction for 3G and 4G cellular mobile licenses in April 2014, with telecom giant China Mobile's Pakistani subsidiary acquiring both licenses for about $516 million, according to the 2014 annual report of Pakistan Telecommunication Authority published in January.

Han said ZTE will invest more in sales channels in Pakistan in 2015 to sell its smartphones as 3G and 4G services are gaining in popularity in Pakistan, a market with nearly 200 million consumers.

China Road and Bridge Corp (CRBC) is in charge of the reconstruction and extension of the Karakoram Highway (KKH), which connects Northwest China's Xinjiang Uyghur Autonomous Region and the northern part of Pakistan across the Karakoram mountain range via the Khunjerab Pass.

The KKH stretches more than 1,200 kilometers and zigzags at elevations of 600 to 4,700 meters above sea level.

The original road was completed during the 1960s and 1970s, but later fell into disrepair.

The reconstruction and extension project started in 2008 and is expected to be completed in September.

"The project consumed 3,000 tons of steel, 3,000 tons of bitumen, and 80,000 tons of cement from the domestic market," said Ye Chengyin, general manager of Pakistan branch of CRBC.

"However, due to the cost factor, and the long transportation distance involved, we chose to only import building materials from China when those produced locally cannot meet our specifications," Ye told the Global Times. "We procured a great many materials from local Pakistani suppliers."

Factors such as import tariffs, customs clearance, production cycle and transportation delays all cost more in both time and money, Ye said.

Not just low-end goods

Experts on the CPEC said the aspect in which CPEC projects can best help the Chinese market are not building materials, but domestic manpower and domestically manufactured high-value products.

"About 700 pieces of engineering equipment, their spare parts and as many as 2,700 Chinese engineers and technicians work on site, plus a sizable workforce engaging in relevant services [back in China]. These are the project's real contributions to the domestic economy," Ye said.

However, the prospect of low-skilled Chinese laborers earning money overseas is changing, Ye said.

"An employer who hires workers from China will have to look after them 24/7. Due to rising wages the cost advantage of hiring Chinese laborers for overseas jobs has disappeared," Ye said, noting that the trend is to employ more local laborers, which also benefits the local community.

When construction of the KKH was at its peak during 2008-09, more than 10,000 Pakistani laborers were working on the project, according to the CRBC.

Only the best for Pakistan

TBEA Xinjiang SunOasis Co, a new energy subsidiary of domestic grid equipment and energy major TBEA, built a 100 megawatt solar plant in the Quaid-e-Azam Solar Park, the first of its kind in Pakistan. The project provides badly needed power for approximately 50,000 common households.

"We are not selling shoes or straws. Our modules are high-quality products, capable of withstanding ultra-high temperatures and wind abrasion, two natural conditions that are both severe at location of the solar park. These products can compete on the world stage," said Hou Peng, director of the international business department at TBEA Xinjiang SunOasis Co.

According to the Chinese Embassy in Pakistan, the majority of Chinese firms doing business in Pakistan are big State-owned firms.

"The plant in Pakistan has amassed the best quality products manufactured by TEBA subsidiaries across China. The transformers are from [Central China's] Hunan Province and [Northwest China's] Xinjiang Uyghur Autonomous Region; the inverter is from [Northwest China's] Shaanxi Province. The cables were manufactured in a plant in [Southwest China's] Sichuan Province. Through an internal bidding process, only the most competitive components can find their way here," Hou told the Global Times.

"The industries we brought to Pakistan are the ones that are most competitive in the domestic market. Our core equipment passed the quality inspection of a German supervising company. Our transformers are used by the leading industry players in the domestic market," Hou said.

Due to the positive effects, the Pakistani government has announced that the solar park's capacity will be expanded.

On June 27, Chinese energy company Zonergy Co signed an agreement with the Punjab provincial government to complete a 300 megawatt solar plant at the Quaid-e-Azam Solar Park by December, the local newspaper Daily Times reported.