As he dines on juicy kebabs at Hazoori Bagh next to the Badshahi Mosque in Lahore, just a few miles from Amritsar, New Delhi will find that the heat from the rise of China will soon ignite economic growth in the Panjab.

While the Indian security establishment will pore over the many agreements, including new ones on defence cooperation signed by Hu in Islamabad today, the most consequential outcome is the bilateral free trade agreement, China’s first such in the subcontinent.

Tomorrow, Hu will join Pakistan’s President Pervez Musharraf in inaugurating a special economic zone near Lahore that has been set up for Chinese businessmen. China and Pakistan are also developing a special textile zone in Faisalabad.

Over the last few years, there had been much talk about Punjab-Panjab cooperation across the Indo-Pak dividing line. Prime Minister Manmohan Singh, during his visit to Amritsar earlier this year, put across a vision for greater cooperation between the two provinces and their joint outreach to Afghanistan and Central Asia.

Given the resistance to creative ideas in the Indian national security establishment and the enduring burden of Indo-Pak relations that trumps the prospects for economic integration between the two Punjabs, it’s Hu’s turn to proclaim “Chini-Panjabi bhai, bhai.”

Then the FTA is expected to boost Sino-Pak trade nearly four times to $15 billion in the next five years. The FTA, however, is only one part of Hu’s ambitious plan for economic integration between Western China and Pakistan. The SEZ projects in West Punjab will establish a framework for rapid expansion of Chinese investments in Pakistan. An agreement today to develop a joint investment company will see Beijing financing a broad range of infrastructure development in Pakistan.

Together, these agreements mark a qualitative transformation of Chinese economic presence in the subcontinent.

For pessimists in New Delhi, the emerging Chinese economic clout in West Panjab would mean Beijing is outflanking India in its own natural hinterland. For optimists, though, the Chinese success in cracking open Pakistan’s market might create new opportunities for the rest of the world, especially India.

New Delhi, which for years has been so focused on Beijing’s military and nuclear partnership with Islamabad and chafed at its tilt towards Pakistan on Kashmir, will soon have to reckon with the fact that Chinese money might soon rule the roost in its neighbourhood.

That China has an FTA with Pakistan and has emerged as the largest trading partner of Bangladesh last year should remind New Delhi that its failure to expand economic cooperation with its important neighbours is proving to be a blessing in disguise for Beijing.

As its tight-fisted Commerce Ministry refuses to lift the many trade barriers with the neighbours and its cloistered security establishment prevents normalisation of bilateral relations with Pakistan and Bangladesh, India has in effect given China a free economic pass in the region.

While the Indian security establishment pats itself on the back for preventing Chinese investments in its border areas, Beijing’s economic presence all across India’s frontiers — from Pakistan in the West, through Nepal in the North and Bangladesh in the East to Sri Lanka in the South — will soon be a powerful reality.

From its own perspective, Beijing has no reason to limit its economic activity in Pakistan to the local market. It would like to gain access to other markets in the region, including those of India, Iran and Afghanistan.

As Chinese capital begins the long overdue regionalisation of Pakistan’s economy, Islamabad should be able to overcome its current political inhibitions on trade with India. The challenge for India, then, lies in creating special economic zones in East Punjab that could feed into and gain from China’s new economic presence across the border.

Free trade pact, 18 others

• China and Pakistan sign 18 agreements, including a free-trade pact aimed at boosting trade from $ 4.26 billio now to $ 15 billion in five years

• No deal announced on nuclear power, though Hu had promised nuclear energy cooperation

• China to collaborate on airborne early warning surveillance system

• Other agreements cover telecom, infrastructure, science & technology, culture

• The two countries have agreed on a five-year plan to boost economic ties

• Chinese and Pakistani companies have struck 13 joint -venture agreements worth $ 3 billion,in chemicals, construction, energy and tourism