Pakistan fears the effect of China's burgeoning economy For more than 50 years, cordial relations with neighbouring China has been a cornerstone of Pakistani foreign policy. Co-operation exists in fields as diverse as agriculture, biotechnology, weapons creation, and the development of infrastructure. Yet serious concerns remain in Pakistan over the effect China's stronger economy is having on its smaller neighbour. The two countries also don't always see eye to eye on the question of militancy. 'No doubt relations with China have many positives for us, but the risks to local businesses - especially small family-run businesses that dominate the Pakistani economic landscape - must be taken into account by authorities,' says Islamabad-based economic analyst Asif Quereshi. 'Efforts should be made to boost trade, definitely. But not at the expense of an already struggling populace.' Last year, the two neighbours signed a Preferential Trade Agreement that gave tariff concessions on 893 Pakistani products for export to China with reciprocal tax relief for 200 Chinese products in Pakistan. Officials have hinted the pact may lead to a broader free trade agreement. Trade between the two has risen 30 per cent in the past two years reaching US$2.5 billion last year. 'Already we have so many products, some that are identical to those produced in Pakistan, but the Chinese ones are cheaper,' said Abdul Malik, a kitchenware store owner in Rawalpindi. The effect on local businesses is a problem for a country where two-thirds of the population lives on less than US$2 a day. But the view of officialdom is that long-term gains outweigh any short-term losses. Apart from military and civilian projects, Pakistani officials hope Gwadar port, site of a car bomb that killed three Chinese and injured 11 others this month, will provide facilities for trade and transshipment of cargo to and from landlocked Central Asian states. This would allow China and Pakistan to monitor sea lanes from the Gulf. China would also gain an alternate route for its imports of oil and energy, most of which come from Gulf states. 'Our two countries share a great convergence of national interests and both have exerted immense efforts to capitalise on that,' said Islamabad-based political analyst Talat Massood. 'Unlike bilateral relations with the United States which have been cyclic, changing from government to government, and devoid of shared values, our relationship with China has been consistently strengthening over the decades.' For both countries the mutually beneficial relationship provides a counter to not only the whims of the US, but to the power of India - with whom both China and Pakistan have territorial disputes. But the problem of militancy in the post-September 11 world has brought new challenges to the relationship as Chinese officials have expressed concerns that militants waging a low-level insurgency in Xinjiang province may be using Pakistani soil for training and supply. At least three Chinese were among those arrested during Pakistani army operations in northern tribal areas. 'The Chinese would like to see more of an effort to counter that problem,' said Mr Massood. 'This is the kind of issue that, if left unattended, could eventually cause serious damage in bilateral relations.'