Will China come to rescue Pakistan at FATF?

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By Andrew Small
There are areas where, although China is willing to spend political capital on Pakistan’s behalf, it doesn’t like being repeatedly put in the position where it has to do so. From the Nuclear Suppliers Group to the UN’s 1267 committee, every now and then a relatively obscure international body provides the stage for a heated geopolitical battle. The most recent drama played out at a plenary meeting of the Financial Action Task Force (FATF), and the storyline was a seemingly familiar one – after inflated expectations on Pakistan’s part, China ends up demonstrating that its support has limits.
Pakistan’s return to the FATF’s “grey list” is costly in its own right, necessitating heightened monitoring and further measures to address terrorist financing. But the fact that the Saudis and the Chinese ended their resistance was arguably worse. Islamabad has been counting on Beijing to help navigate a period of growing US pressure, and believed that casting its lot in more fully with a rising China would be a sound long-term bet. Cruelest of all, though – Beijing did a deal not just with Washington but with New Delhi. China was looking to secure the FATF presidency and the United States had encouraged a Japanese candidacy to block the bid. Pakistan’s listing was the price Beijing paid for Indian and US backing, which paved the way for a clear Chinese run at the position. The Indian MEA’s congratulatory tweet to China the next day was a virtual victory lap. This wasn’t the first time in recent months either. At the BRICS summit in Xiamen last year, China – during tough negotiations with Indian officials – ended up accepting the wording in the joint statement that named Pakistani militant outfits as a regional security concern. That could be written off as a mistake: Beijing had believed it could get away with using “cut and paste” language from a prior intergovernmental meeting in Islamabad that Pakistan itself had signed on to. China had not thought through the ramifications of repeating the same phraseology at a higher-profile summit meeting where the Pakistanis themselves were not present.
Similarly, Chinese behavior in Paris could be explained away as a product of circumstance – the Saudis had been persuaded to change stance anyway, and China and Turkey alone could not have prevented the listing. Nonetheless, it has started to look like a pattern: after considerable obduracy in recent years, Chinese political backing for Pakistan now appears less assured.
These developments should not be over-interpreted. It remains true that China is deepening its overall economic and security support to Pakistan, as the continued advance of CPEC attests. But the question of Beijing’s limits has always been an important one. It is most often understood in military terms: whether in 1971 or 1999, China has demonstrated little willingness to swing in on Pakistan’s side during crises of its own making. Its support has focused on providing Pakistan with the capabilities that it needs, not acting as a military ally. These limits have also been in evidence in the diplomatic sphere, such as China’s clear signal in the aftermath of the Mumbai attacks that it would not protect Pakistani militants at the UN, and economically, where China has been much keener to see Pakistan go to the IMF than to provide its own bailouts.
So how are we to interpret the developments in Paris in the longer arc of the China-Pakistan relationship?
First, there are areas where, although China is willing to spend political capital on Pakistan’s behalf, it doesn’t like being repeatedly put in the position where it has to do so. This is particularly true for issues relating to terrorism, where Beijing faces its own problems of growing complexity, relies on the cooperation of an array of other countries to address them, and cannot afford to be wholly inflexible. China is also, despite the routine statements about Pakistani sacrifices at MOFA press briefings, quietly sympathetic to its critics, even if Beijing does not think that outside pressure is the right way to bring about a change in Pakistan’s approach. Second, China is returning to an understanding that relations with India and Pakistan cannot entirely be de-hyphenated. The sharp deterioration in Sino-Indian relations in the last few years is partly a product of China’s handling of Pakistan-related issues, from CPEC to Masood Azhar to the NSG. In the aftermath of Doklam, China has been aware – at least at the diplomatic level – that it needs to get ties with New Delhi on a sounder footing in the coming period if competition between the two powers is going to be managed effectively. While this won’t mean throwing Pakistan under the bus, it will be impossible to reach a new Sino-Indian modus vivendi if these issues are taken off the negotiating table entirely. While there is no doubt that China attached value to securing the FATF presidency, it also valued the deal with India as a positive in its own right.
Third, in the global financial system, Chinese power is still relatively restricted. For all China’s vast reserves and investment capacity, there is not yet an alternative Shanghai-and-renminbi-centric order to the dollar system, New York, and SWIFT. From Iran to Russia, major Chinese banks and companies have trodden very carefully when there are risks that they might be cut off from that system as a result of their dealings with designated companies and individuals. If the FATF is a prelude to further pressure from the United States and Europe in the financial sector, it is better that Pakistan takes further steps to clean things up now than risk China’s economic activities in the country being exposed to more severe problems further down the line. This is not an area in which Beijing can ultimately shield Pakistan, even if it wants to.
(Andrew Small is a senior transatlantic fellow at the German Marshall Fund of the United States. He has worked on foreign and economic policy issues in Beijing, Brussels, London, and Washington D.C., where he is now based. He is the author of the book The China-Pakistan Axis.(Article courtesy The print.in)