China's Pakistan Conundrum

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China is often called an "all-weather friend" to Pakistan -- a strategic partner, a reliable source of trade and aid, and Islamabad's closest military ally. Pakistani Prime Minister Yousef Raza Gilani has described the friendship between the two countries as "higher than mountains, deeper than oceans, stronger than steel, and sweeter than honey." In September, he told the visiting Chinese Public Security Minister Meng Jianzhu, "Your friends are our friends," continuing, "your enemies are our enemies, and your security is our security."

But do things look so straightforward when viewed from Beijing? To be sure, Chinese money pours into places Western cash fears to tread. But Beijing is not oblivious to risk. In fact, Chinese money flows disproportionately to investments that carry little to no risk and deliver returns that, however modest, are predictable. Moreover, at least some Chinese companies have proved willing to abandon investments as their perception of risk has risen. In September, for example, Kingho, a large private Chinese miner, is reported to have abandoned a proposed $19 billion investment to build a coal mine and power and chemical plants in Pakistan's Sindh province after reassessing investment and security risks.

Indeed, Beijing's investment calculus is increasingly based on a sophisticated balancing of three types of risk: geopolitical, political, and financial.

Geopolitical risk (not least China's rivalry with India) has long led Beijing to support Islamabad through thick and thin. Friendly ties between the two help satisfy four Chinese strategic objectives: They ensure security and stability in China's western provinces and along its continental Asian border; anchor China's poorer western provinces in a web of cross-border economic activity; bottle up India in the subcontinent, forestalling the emergence of a continental-sized rival and precluding more extensive Indian security activities in East Asia; and assure that no other major power, particularly the United States, advances its interests in continental Asia at China's expense through, for instance, military deployments or permanent access arrangements.

In recent years, these four objectives have become ever more pressing, reinforcing Beijing's inclination to support Pakistan. Take the issue of securing China's western border. The drawdown of U.S. forces in Afghanistan will, unavoidably, prompt serious questions in Beijing about Kabul's capacity to maintain security. That, in turn, will prompt still larger questions about whether Pakistan and Central Asian governments can suppress extremist groups and ideologies that may emanate from Afghanistan and Pakistan's tribal areas and bleed across the Chinese frontier.

Beijing also aims to use Islamabad to box out New Delhi in Afghanistan and the broader region. Thus, India's expanding reach into East Asia is no doubt reinforcing China's reflexive tilt toward Pakistan. Until now, India has been, at most, a third-tier Chinese strategic concern -- distantly behind internal insecurity and challenges in the East Asian littoral. But India's rapid economic growth has given it a growing strategic profile beyond South Asia. India is becoming an Asian power and a global player. It is deepening defense ties with Australia, Japan, Singapore, and Vietnam, four countries that are wary of China's rise and also are increasingly close to the United States. And New Delhi has signed free trade agreements with South Korea, Singapore, and the Association of Southeast Asian Nations (ASEAN), as well as a comprehensive economic partnership with Japan. As India's strategic reach expands, a continuing rivalry with Pakistan that preoccupies its diplomacy and pulls its attention back to its own neighborhood remains a net positive for Beijing.

Through this traditional geopolitical prism, then, Beijing's relationship with Islamabad appears unassailable. But Beijing no longer has the luxury of looking exclusively through this single lens. Increasingly, it also balances the political, and especially financial, risks to its interests.

Chinese nationals in Pakistan have come under unprecedented attack in recent years. And Beijing is ever more sensitive to protecting those citizens -- mostly engineers and other skilled workers -- abroad. Libya proved a watershed in this regard because of the scope and sheer scale of the Chinese presence there. The onset of violence yielded a robust debate in China about the state's responsibilities to its citizens overseas. Sensitive to domestic perceptions and pressures, Beijing undertook its largest ever noncombatant evacuation, removing some 35,000 Chinese nationals from Libya by chartered merchant vessels, chartered and military aircraft, and overland buses. The Chinese navy also dispatched a frigate to support the operation, an unprecedented long-range operational deployment.