Despite growing trade relations there has been no direct financial or banking link between the two countries that have over 50 years of friendship. National Bank opened a branch in China few years back but the trade people say it was not sufficient unless Chinese banks open branches in Pakistan.
The decision to open branches of ICBC was taken in December 2010 during the visit of Chinese Premier Wen Jiabao. “State Bank of Pakistan is pleased to declare “Industrial and Commercial Bank of China Limited” as a scheduled bank with effect from August 18, 2011,” said a circular issued by the SBP on Tuesday.
“The ICBC will start functioning from August 18 with a paid-up capital of Rs3 billion,” said Syed Wasimuddin, Chief Spokesman of the SBP. He said the bank would initially operate with two branches, one in Karachi and other in Islamabad. The trade bodies in Pakistan have been demanding for more financial relation with China in view of growing trade relation, but the two countries so far have practically ignored it. While the trade relation with China has increased rapidly the balance of trade is heavily against Pakistan.
In 2010-11, the volume of bilateral trade reached $5.789 billion but the import from China was significantly dominant. The volume of import from China rose to $4.144 billion while export to China remained at $1.645 billion. Pakistan’s export is only 39 per cent of what it imported from China during the last year.
However, Pakistani exporters and analysts believe that China has vast scope for Pakistani products being the biggest market of the world. With the opening of direct financial link the trade volume could suddenly improve but the traders said Pakistan required to bringing down the cost of production since China is the market of low-cost products. When it was decided in December that China would open banks in Pakistan, the Pakistani bankers did not show any threat from entrance of Chinese banks.