Pakistan-China Relations: The next phase of CPEC & a changing global landscape -

By: Shamsul Haq

The China-Pakistan relationship is entering a new phase. As the global order undergoes profound changes marked by geopolitical competition, economic uncertainty and shifting trade patterns, the partnership between Islamabad and Beijing has acquired renewed significance.
At the centre of this relationship is the China-Pakistan Economic Corridor (CPEC), which now stands at a critical juncture. The first phase concentrated largely on infrastructure, energy and connectivity. The next phase will have to address a more consequential question: can these investments translate into sustained industrial growth, higher exports and greater economic productivity?
The first phase saw the completion of 43 projects worth more than $25 billion, including road infrastructure and power projects with a combined generation capacity of around 9,500 megawatts. These investments helped address major energy shortages and improve connectivity.
The challenge now is to build on that foundation.
CPEC 2.0 is expected to place greater emphasis on Special Economic Zones, business-to-business investment, agricultural modernisation, mining and mineral processing, science and technology, and the development of Gwadar as a regional commercial hub. Cooperation in technical training, human-resource development and access to regional markets will also be important.
For Pakistan, the timing is significant. The country needs to broaden its productive base, diversify exports and create employment for a growing population. The success of the next phase will therefore depend on whether CPEC can encourage commercially viable industries rather than remain primarily associated with physical infrastructure.
Business-to-business cooperation can help in this transition. Joint ventures between Pakistani and Chinese companies could provide access to capital, technology, managerial expertise and international supply chains. Pakistani firms, however, will need to improve productivity and competitiveness if they are to become meaningful partners rather than passive recipients of investment.
The mining sector illustrates both the opportunity and the challenge. Pakistan possesses substantial mineral resources, but much of their potential remains untapped. Greater cooperation in exploration, processing and value addition could enable the country to retain a larger share of the economic benefits from its natural resources instead of exporting them in relatively unprocessed form.
Agriculture offers another area of considerable potential. Chinese expertise in mechanisation, irrigation, modern farming techniques, food processing and supply-chain management could help Pakistan raise productivity and reduce post-harvest losses. The emphasis should be on developing integrated value chains that connect farmers with processing facilities and domestic and international markets.
Technology and human capital will be equally important. Pakistan’s young population can become a major economic asset if education and technical training are aligned with the demands of modern industry. Cooperation in information technology, artificial intelligence, digital services, engineering and vocational education could open new avenues for employment and participation in global markets.
Gwadar is central to the wider connectivity vision. Pakistan’s location gives it the potential to link China and Central Asia with markets in the Middle East and beyond. But becoming a regional trade hub will require more than a functioning port. Efficient logistics, reliable transport links, industrial activity, business-friendly regulations and strong connections with regional markets will be essential.
The geopolitical dimension of CPEC also deserves attention. Pakistan and China have developed a relationship based on decades of political trust and strategic cooperation. In an increasingly contested international environment, Pakistan regards China as an important economic and diplomatic partner, while China considers Pakistan significant because of its geographical position and potential role in regional connectivity.
Yet the durability of this partnership will increasingly depend on economic performance. Chinese investment can provide an important catalyst, but Pakistan must create the conditions in which that investment generates lasting domestic value. Policy continuity, regulatory predictability, transparency, ease of doing business, reliable energy supplies and stronger institutions will be essential.
The private sector should consequently have a much larger role in the next phase. A government-to-government framework can facilitate major projects, but broad-based economic gains require Pakistani businesses to participate directly in investment, production and trade. Greater integration with Chinese and international supply chains could help domestic companies move towards higher-value activities.
The changing global economy makes this transition particularly important. As supply chains are being reconfigured and countries seek new production and trading partners, Pakistan has an opportunity to position itself as a competitive manufacturing, agricultural and services base. CPEC can provide a platform for this, but it cannot substitute for domestic economic reform.
The next phase should therefore be understood not simply as an extension of CPEC’s infrastructure programme, but as an opportunity to reshape Pakistan’s productive economy. Its success should ultimately be measured by industrial output, export growth, skilled employment, technology adoption and the emergence of globally competitive Pakistani enterprises.
For China, a more productive and economically stable Pakistan would strengthen the long-term value of the bilateral partnership. For Pakistan, deeper economic integration with China could provide access to capital, technology, markets and regional connectivity at a time when the global economy is being reorganised.
The real promise of CPEC 2.0, therefore, lies beyond the construction of individual projects. Its significance will be determined by whether Pakistan can turn connectivity into commerce, investment into productive capacity, and cooperation into sustainable economic opportunity.
That will require not only Chinese commitment but also consistent policies, stronger institutions and greater economic competitiveness at home. If those conditions are met, CPEC 2.0 could become an important instrument of Pakistan’s industrial and economic transformation — and give the long-standing Pakistan-China partnership a stronger economic foundation for the future.