Iron Brothers China and Pakistan Celebrate 75 Years of "Unbreakable" Friendship

President Xi Jinping and Prime Minister Shehbaz Sharif have met today in Beijing to reaffirm the "unbreakable" bond between their two "iron brother" countries on the 75th anniversary of the establishment of the China-Pakistan diplomatic ties. "No matter how the international landscape may evolve, China will always place priority on the development of China-Pakistan relations in its diplomacy with neighboring countries," he said. Over 7 decades of friendship witnessed Pakistan help bring about the US-China rapprochement that has enabled the Asian giant to grow from international isolation to what President Donald Trump recently declared part of "G2", the exclusive group of two real superpowers in the world today. Prime Minister Shehbaz Sharif's three-day visit to China has seen the signing of multiple agreements to further strengthened strategic and economic relations between two Asian neighbors. These deals are aimed at developing Pakistan's digital economy and renewable energy sectors. 

Prime Minister Shehbaz Sharif (L) with President Xi Jinping

Digital Economy:

Prime Minister Shehbaz Sharif began his 3-day official visit to China with the city of Hangzhou where he was warmly welcomed by Chinese officials. He led a business-to-business (B2B) investment conference with private business leaders from China and Pakistan.  Hangzhou is known for its huge digital economy, e-commerce dominance, and an aggressive push into "future technologies" like embodied AI, robotics, and drones. It is home to the Chinese tech giant Alibaba. 

Prime Minister Sharif visited Alibaba’s headquarters where he forged a comprehensive strategic agreement with the tech giant's Chairman Tsai "right now" to accelerate Pakistan's digital economy. The deal covers AI infrastructure, cloud computing, digital payments and e-commerce.  

Renewable Energy:

Prime Minister Sharif also received CATL Executive Vice President Oscar Lou in Hangzhou. CATL is a leading manufacturer of advanced batteries used for energy storage and electric vehicles. Sharif invited CATL and other renewable energy equipment makers to invest in Pakistan to respond to the growing needs of the country. 

In a meeting with Sheng Huo Neng Yuan Ke Ji Company CEO Agnes Siu, discussions focused on cooperation in the renewable energy sector, particularly solar power. The prime minister highlighted Pakistan’s growing renewable energy market and government measures aimed at facilitating investment in the sector. He also met with Danwei Shao, the Chairwoman of Starcharge Group, to build electric vehicle charging infrastructure and smart mobility systems in Pakistan. 

Sharif argued that the industries where China was no longer competitive because of expensive labor could come to Pakistan, bring in plant and machinery, enter into joint ventures with Pakistani entrepreneurs, manufacture goods, and export to third countries.

Other Industries:

Sharif pitched for Chinese investments and cooperation in other key sectors, including agriculture, pharmaceuticals, textiles and mining. 

President Xin Yuan of Xiuzheng Pharmaceuticals called on the prime minister and discussed pharmaceutical manufacturing, healthcare cooperation and investment opportunities in Pakistan’s growing medical sector.

Sharif promoted a number of special economic zones (SEZs) created by the Pakistan government, Specifically, he mentioned a special economic zone in Karachi spread over more than 6,000 acres of land, where all basic amenities would be provided so that Chinese investors and Pakistani entrepreneurs together could invest there.

Beijing Visit:

Prime Minister Sharif and his team flew from Hangzhou to Beijing to meet with the top Chinese leaders, including President Xi Jinping, Prime Minister Li Qiang and Foreign Minister Wang Yi. 

President Xi told the visitors that China firmly supports Pakistan in safeguarding its independence, sovereignty, and territorial integrity. "No matter how the international landscape may evolve, China will always place priority on the development of China-Pakistan relations in its diplomacy with neighboring countries," he said.

Foreign Minister Wang, also a member of the Political Bureau of the Communist Party of China Central Committee, held a meeting with Pakistan's Chief of Defense Forces and Chief of Army Staff Syed Asim Munir. No matter how the international and regional situation changes, the friendship between China and Pakistan has always been as solid as a rock and unbreakable, Chinese Foreign Minister Wang Yi said to him on Monday.

Joint Statement:

At the conclusion of Prime Minister Sharif's China visit, a joint China-Pakistan statement said the two nations have reached a “new broad consensus” ⁠on deepening strategic ⁠ties to bolster the development of a joint economic corridor and establish the port of Gwadar as a regional connectivity hub. “The two sides engaged cordially and reached a new broad consensus on further deepening the China-Pakistan All-Weather Strategic Cooperative Partnership,” the statement said. 

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Chinese Lab's AI LLM Performance Shocks Silicon Valley

A Chinese Lab has sparked panic in Silicon Valley with the release of its first AI model that can outperform America's best despite being built more cheaply and with less-powerful chips, according to the US media reports. The lab called DeepSeek has recently unveiled a free, open-source large-language model (LLM) that it says took only two months and $5.5 million million to build, using reduced-capability chips from Nvidia called H800s. By comparison, the US-based OpenAI's closed LLM model cost $100 million to develop and train using the most advanced H100 chips from Nvidia. Open-source and free DeepSeek models can significantly help developing nations like Pakistan by providing affordable access to the latest AI technology, allowing them to develop solutions tailored to their specific needs without high costs. 

DeepSeek, a small startup lab in China, has accomplished this feat despite the US technology export controls to slow down China's AI efforts. Former Google CEO Eric Schmidt is now acknowledging that China has narrowed or closed the AI technology gap with the United States. 

In 2022 America banned the export of advanced chips to China, according to Economist magazine. Nvidia, a leading chipmaker, has had to design special downgrades to its products for the Chinese market. America has also sought to prevent China from developing the capacity to manufacture top-of-the-line chips at home, by banning exports of the necessary equipment and threatening penalties for non-American firms that might help, too. 

The slower H800 chip was created by Nvidia to comply with export regulations that prevent the chipmaker from selling its high-end GPUs to China. Apparently, the limits imposed by Washington on Chinese engineers' access to the most advanced Nvidia chips forced them to develop a much more efficient model to achieve the same performance as their US counterparts.  Other Chinese tech companies ranging from Alibaba and Huawei to TenCents are also working on their own multiple AI models, including LLMs. 

DeepSeek has emerged from High-Flyer, a Chinese hedge fund started by 40-year-old Liang Wengfeng in 2015 to use AI to gain an edge in stocks-trading. Conducting fundamental research helped High-Flyer become one of the biggest quant funds in the country, according to The Economist magazine. 

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2018 Year-end Review of Science and Technology in Pakistan

Pakistan saw its technology exports grow by double digits to surge past $1 billion mark in 2018. Nature magazine reported the country ranked first in the world in research output growth in year 2018. Pakistan mobile broadband subscriptions grew by 1-2 million a month to pass 60 million. Google's Singapore-based Asia business lead Lars Anthonisen wrote that "Pakistan is quickly becoming a digital-first country". Chinese e-commerce giant Alibaba and its digital payments platform Alipay entered Pakistan market by acquiring Daraz.pk and Telenor EasyPaisa.  Dr. Ata ur Rahman Khan, former chairman of higher education commission, asserted in an op ed that "Pakistan churns out about 22,000 computer-science graduates each year". Pakistan set an ambitious goal for its first human space flight in 2022.  It was an exciting year for science and technology in the South Asian nation of over 200 million people.

Pakistan Technology Exports:

Pakistan's information technology exports have bucked the nation's declining exports trend with double digit growth to reach $1,065 million in fiscal year 2018, according to the State Bank of Pakistan.  It is generally believed that Pakistan's central bank underestimates technology exports. Some have argued that the actual IT exports were closer to $5 billion in fiscal 2018. Some of the differences can be attributed to the fact that the State Bank IT exports data does not include various non-IT sectors such as financial services, automobiles, and health care.

Source: State Bank of Pakistan

Pakistan IT exports surged 13.4% to $1.06 billion in fiscal year 2018 from $939 million in fiscal year 2017. The growth was even more robust in the prior year with IT exports rising 19.1% from $789 million in fiscal 2016 to reach $939 million in fiscal year 2017.

Source: State Bank of Pakistan

About $320 million of IT exports revenue in fiscal 2018 came from software exports while the rest was made up of services such as consulting, telecom and call centers.

Scientific Research Output:

Pakistan is one of the world's top two countries where the research output rose the fastest in 2018, according to Nature Magazine. The publication reports that the "global production of scientific papers hit an all-time high this year...with emerging economies rising fastest".

Countries With Biggest Rises in Research Output. Source: Nature

Pakistan ranked first or second depending  on whether one accepts the text or the graphic (above) published by Nature.  The text says Egypt had 21% growth while the graph shows Pakistan with 21% growth. Here's an excerpt of the text: "Emerging economies showed some of the largest increases in research output in 2018, according to estimates from the publishing-services company Clarivate Analytics. Egypt and Pakistan topped the list in percentage terms, with rises of 21% and 15.9%, respectively. ...China’s publications rose by about 15%, and India, Brazil, Mexico and Iran all saw their output grow by more than 8% compared with 2017".

Pakistan's quality-adjusted scientific output (Weighted Functional Count) as reported in Nature Index has doubled from 18.03 in 2013 to 37.28 in 2017. Pakistan's global ranking has improved from 53 in 2013 to 40 in 2017. In the same period, India's WFC has increased from 850.97 in 2013 to 935.44 in 2017. India's global ranking has improved from 13 in 2013 to 11 in 2017.

Pakistan Telecom Indicators. Source: PTA

Digital Growth:

Mobile broadband subscriptions (3G and 4G) grew at a rate of 1-2 million per month to pass 60 million in 2018, according to data from Pakistan Telecommunication Authority (PTA).  Rising digital infrastructure is enabling a whole range of applications from e-commerce to digital payments and greater financial inclusion. It prompted Google's Singapore-based Asia business lead to write that "Pakistan is quickly becoming a digital-first country"

Alipay, a subsidiary of Hangzhou-based Ant Financial, has received approval by the Competition Commission of Pakistan (CCP) to acquire a 45 percent stake in Pakistan's Telenor Microfinance Bank for $184 million.  Alipay's entry is expected to expedite widespread adoption of digital payments in the country. Several domestic mobile payment services offered by telecom operators are currently operating in Pakistan. The lack of international reach has kept the penetration rate of the payment portals relatively low. Entry of Alipay, the world's largest mobile payment platform, will intensify digital payments competition,  improve the quality of service, energize the industry and enhance financial inclusion in a country where less than 20% of the population has bank accounts.

E-Commerce Growth:

At the World Economic Forum in 2017, Ebay’s chief executive Devin Wenig highlighted Pakistan as one of the fastest growing e-commerce markets in the world.  It might have prompted Alibaba to acquire Daraz.pk, Pakistan’s largest e-commerce platform, in May 2018.

Online sales in Pakistan's $152 billion retail market are doubling every year,  according to Adam Dawood of Yayvo online portal.  The country's retail market is the fastest growing in the world, according to Euromonitor.  Expanding middle class, particularly millennials with rising disposable incomes, is demanding branded and packaged consumer goods ranging from personal and baby care items to food and beverage products. Strong demand for fast moving consumer goods is drawing large new investments of hundreds of millions of dollars.  Rapid growth in sales of consumer products and services is driving other sectors, including retail, e-commerce, paper and packaging, advertising, media, sports and entertainment. Potential downsides of soaring consumption include increased amount of  solid waste and decline in domestic savings and investment rates.

Summary:

Pakistan saw its technology exports grow by double digits to surge pass $1 billion mark in 2018. Nature magazine reported the country ranked first in the world in research output growth in year 2018. Pakistan mobile broadband subscriptions grew by 1-2 million a month to pass 60 million. Google's Singapore-based Asia business lead wrote that "Pakistan is quickly becoming a digital-first country". Chinese e-commerce giant Alibaba and its digital payments platform Alipay entered Pakistan market by acquiring Daraz.pk and Telenor EasyPaisa.  Dr. Ata ur Rahman Khan, former chairman of higher education commission, asserted in an op ed that "Pakistan churns out about 22,000 computer-science graduates each year". Pakistan set an ambitious goal for its first human space flight in 2022.  It was an exciting year for science and technology in the South Asian nation of over 200 million people.

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Chinese ECommerce Giant Alibaba Enters Pakistan Market

Alibaba Group (BABA.N) has bought the entire share capital of ecommerce platform Daraz, Rocket Internet said, according to Reuters. American ecommerce giant Amazon is already in Pakistan via its investment in another ecommerce platform Clicky.pk.

Daraz, founded in Pakistan in 2012, operates online marketplaces in Pakistan, Bangladesh, Myanmar, Sri Lanka and Nepal. The unit will continue to operate under the same brand following the sale to Alibaba, Rocket said.

Online sales in Pakistan's $152 billion retail market are doubling every year,  according to Adam Dawood of Yayvo online portal. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.

Media reports suggest global e-commerce behemoth Amazon.com could purchase substantial stake in Pakistan's e-commerce site  Clicky.pk.

Amazon's Presence in Pakistan:

Amazon already owns about 33% stake in Clicky.pk through its acquisition in 2017 of Dubai-based online retailer Souq.  Souq acquired this stake in the Pakistani company in late 2016.

Today, Alibaba Group (BABA.N) announced the purchase of the entire share capital of ecommerce platform Daraz, according to Reuters.

E-Commerce Market Growth: 

Online sales in Pakistan's $152 billion retail market are growing much faster than the brick-and-mortar retail sales. Adam Dawood of Yayvo online portal estimates that e-tail sales are doubling every year. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.

E-commerce in Pakistan is being enabled by increasing broadband penetration and new online payment options. Ant Financial, an Alibaba subsidiary, has just announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.

Payment Options: 

Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.

Summary: 

Online sales in Pakistan's $152 billion retail market are doubling every year,  according to Adam Dawood of Yayvo online portal.  The country's retail market is the fastest growing in the world, according to Euromonitor.  Expanding middle class, particularly millennials with rising disposable incomes, is demanding branded and packaged consumer goods ranging from personal and baby care items to food and beverage products. Strong demand for fast moving consumer goods is drawing large new investments of hundreds of millions of dollars.  Rapid growth in sales of consumer products and services is driving other sectors, including retail, e-commerce, paper and packaging, advertising, media, sports and entertainment. Potential downsides of soaring consumption include increased amount of  solid waste and decline in domestic savings and investment rates.

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