By Khawaja Hamza
When Pakistan and China formally launched the China-Pakistan Economic Corridor (CPEC) in 2013 under the broader vision of the Belt and Road Initiative, it was presented as more than a collection of infrastructure projects. It was described as a transformative economic partnership — one that would reshape Pakistan’s energy landscape, modernize its transport network, revive its industrial base and reposition the country as a regional connectivity hub.
More than a decade later, the first phase of CPEC has largely delivered on its core promise: Pakistan’s crippling electricity shortages have eased, major highways now connect distant regions, and Gwadar Port stands operational on the Arabian Sea. Yet the corridor is now entering a far more complex and consequential chapter.
The question is no longer whether roads and power plants can be built. The question is whether they can translate into sustained exports, industrial growth, macroeconomic stability and long-term competitiveness.
From Blackouts to Power Surplus — and Financial Pressure
CPEC’s earliest impact was visible in the energy sector. At a time when daily load-shedding crippled businesses and households, Chinese-backed projects injected nearly 9,000 megawatts into Pakistan’s national grid. Coal-based plants, wind and solar farms, hydropower initiatives, and a high-capacity ±660kV HVDC transmission line transformed electricity availability.
The development of Thar coal mining marked a strategic shift, unlocking indigenous energy resources that had remained dormant for decades.
But success has introduced new complications. A rapid expansion of distributed solar installations has reduced grid demand projections. Major hydropower projects like Kohala and Azad Pattan now face optimization challenges under revised least-cost planning models. Capacity payments to independent power producers have placed fiscal strain on the government.
Islamabad and Beijing are currently conducting joint studies to rationalize the future energy portfolio under CPEC.
Pakistan is also exploring conversion of imported coal plants to Thar coal and pursuing debt reprofiling mechanisms for CPEC IPPs.
Energy cooperation has moved from crisis management to financial recalibration.
Highways Built, Railways Awaiting Momentum
Transport infrastructure remains one of CPEC’s most tangible achievements. Nearly 900 kilometers of highways and motorways have been completed, dramatically improving north-south connectivity. The Peshawar–Karachi Motorway spine has shortened travel times and strengthened logistics corridors.
The iconic Karakoram Highway — Pakistan’s only land link to China — now operates year-round. Yet even this symbol of connectivity faces structural challenges, as sections risk submergence due to dam reservoirs along the Indus River.
Realignment work is essential to prevent disruption of the only overland trade route between the two countries.
Meanwhile, the long-awaited modernization of Pakistan Railways under the ML-1 project remains under financing negotiations.
Although feasibility work is complete and leaders have agreed to initiate the Karachi-Hyderabad section on a pilot basis, full-scale transformation of the rail network has yet to materialize.
Road connectivity has advanced swiftly.
Rail modernization must follow to unlock the corridor’s full logistical potential.
Gwadar: Strategic Asset Seeking Commercial Scale
Gwadar Port, often described as the crown jewel of CPEC, has transitioned from blueprint to operation. The free zone is energized, a desalination plant is functioning, dredging work has been completed and cabinet decisions now route selected public-sector imports through the port.
Yet utilization remains below early expectations.
The coming years will determine whether Gwadar evolves into a fully functional logistics and industrial hub or remains a strategically symbolic outpost. Sustained shipping traffic, industrial tenancy and integration into global supply chains will define its trajectory.
Industrial Cooperation: The Real Test of Phase-II
CPEC’s second phase marks a decisive shift toward industrial cooperation and private-sector engagement. Four priority Special Economic Zones across Pakistan are being positioned to attract Chinese industries seeking diversification amid global tariff shifts and supply chain restructuring.
Pakistan offers competitive labor costs, tax incentives and geographic access to regional markets. The government is encouraging relocation of export-oriented, labor-intensive industries from China to Pakistan.
However, macroeconomic realities complicate the transition. Pakistan’s commitments under its IMF program limit new fiscal incentives for special zones. Investors demand policy consistency and security guarantees. Industrial relocation will require more than infrastructure — it demands structural reform, ease of doing business and credible market access.
Industrialization, not infrastructure, will determine whether Phase-II delivers transformative results.
The Trade Imbalance Dilemma
Despite infrastructure progress, Pakistan’s exports to China have remained largely stagnant over the past decade, while imports have surged. China now accounts for the largest share of Pakistan’s trade deficit.
Under the China-Pakistan Free Trade Agreement, Beijing committed to zero-rating 75 percent of imports from Pakistan by 2030. Islamabad argues that other economies — including ASEAN members and Bangladesh — have received deeper concessions. Pakistan has formally requested expanded tariff coverage across 1,768 tariff lines to restore competitive parity.
For Islamabad, enhanced market access is not a diplomatic preference but an economic imperative. Without export expansion, CPEC risks deepening structural trade imbalances rather than correcting them.
Agriculture and Digital Cooperation: Emerging Frontiers
Agriculture, contributing nearly 20 percent to Pakistan’s GDP, has gained prominence within CPEC’s evolving framework. Pakistani agricultural graduates are receiving training in China, biotechnology cooperation has expanded, and demonstration projects in soybean, canola and chili cultivation are underway.
Exports of sesame, red chili, dairy and meat products to China have shown incremental growth. Climate-smart farming, value addition, aquaculture and digital e-commerce linkages represent the next frontier.
Simultaneously, digital cooperation in artificial intelligence, green technologies and innovation aligns with President Xi’s vision of growth, green and innovation corridors. Pakistan has integrated this approach with its own 5Es framework — Exports, E-Pakistan, Environment, Energy, and Equity.
These quieter sectors may ultimately prove more sustainable than heavy infrastructure.
Security: The Unavoidable Foundation
Repeated attacks on Chinese nationals have reinforced one hard reality: no corridor functions without security. Pakistan has established dedicated security divisions, integrated intelligence dashboards, joint working groups and continuous security audits.
Security arrangements are now institutionalized and remain central to sustaining investor confidence.
Beyond Bilateral: Regional and Geopolitical Dimensions
CPEC’s scope is expanding beyond Pakistan-China bilateral engagement. Discussions continue on extending connectivity into Afghanistan and linking Central Asia to Pakistani seaports through a proposed Uzbekistan-Afghanistan-Pakistan railway corridor.
At the same time, CPEC operates within a complex geopolitical environment, shaped by global scrutiny of China’s overseas investments and regional security dynamics.
For Beijing, CPEC remains a flagship Belt and Road project. For Islamabad, it is a cornerstone of long-term economic strategy.
The Decisive Decade Ahead
CPEC’s first decade solved urgent infrastructure gaps. Its second decade must solve structural economic challenges:
export stagnation, industrial weakness, fiscal pressures and climate resilience.
The corridor now stands at a crossroads.
If industrial relocation accelerates, market access improves, debt sustainability is managed and security remains intact, CPEC could redefine Pakistan’s economic trajectory and regional role.
If these outcomes fail to materialize, the corridor risks being remembered primarily for concrete and steel rather than transformation.
The foundations have been laid.
The next chapter will determine whether CPEC becomes a lasting engine of competitiveness — or simply an ambitious infrastructure experiment in a rapidly changing global order.
Writer is an Islamabad-based journalist, offers in-depth analysis on security, political, and foreign affairs, and can be contacted at hamzakhawaja793@gmail.com
