(Bloomberg) — Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif agreed in a meeting in Beijing to launch a high-speed rail project that could cost $9.85 billion, a move that comes as the world’s No. 2 economy moves to slow some of its lending due to growth concerns.
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The two nations agreed to get started on the Main Line-1, according to a statement from Sharif’s office, which described it as “a project of strategic importance.”
That project involves upgrading a 1,163-mile, colonial-era track from Karachi to Peshawar to carry high-speed trains. Earlier this week, Pakistan formally approved the project, which has been in discussion for years, without saying where the funding would come from or providing technical details.
Officials in Pakistan have previously said they expected to get loans from China for the upgrade.
The US has in the past criticized China for using what it calls “debt diplomacy” to make developing nations more dependent on Beijing. Still, earlier this year China delayed a bailout for Pakistan as its debt soared, and it has been scaling back lending in Africa as its economy slows.
About 30% of Pakistan’s foreign debt is owed to China, including state-owned commercial banks, the International Monetary Fund said in a report in September.
In June, Moody’s Investors Service downgraded its outlook on Pakistan to negative from stable, citing financial concerns.
See: Xi Kicks Off Third Term With Flurry of Diplomatic Activity
In their talks, Xi and Sharif agreed to finalize details on an inner-city rail line in Karachi. The Chinese leader also said his nation would provide 500 million yuan ($68.7 million) to Pakistan to help it rebuild after flooding over the summer that displaced more than half a million people.
Also Wednesday, the two countries’ central banks signed a memorandum of cooperation on a yuan clearing in Pakistan, the People’s Bank of China said in a statement. It didn’t give more details.
Sharif is wrapping up a two-day visit to Beijing. China is hosting a flurry of foreign leaders this week, as Xi kicks off a norm-busting third term during which he’s vowed to increase his nation’s global influence.
Vietnam’s Communist Party chief Nguyen Phu Trong became the first foreign leader to meet Xi since the Chinese president removed rivals and installed loyalists at a leadership reshuffle last month.
Xi and his top officials are then expected to hold talks in the capital with German Chancellor Olaf Scholz and Tanzanian President Samia Suluhu Hassan. Later this month, he will likely travel to Indonesia and Thailand for major summits attended by global leaders including President Joe Biden and Russia’s Vladimir Putin.
–With assistance from Francesca Stevens and Kamran Haider.
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