HomeWorldAsiaChina-Pakistan Economic Corridor: Opportunities and Challenges

China-Pakistan Economic Corridor: Opportunities and Challenges

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Xinmei Zhou, Xinyu Ma & Qian Geng

Amidst unprecedented transformation, the Belt and Road Initiative, introduced by China in 2013, has transitioned from a conceptual framework to tangible implementation, reflecting the rational operation and gradual evolution of global integration. The China-Pakistan Economic Corridor (CPEC), as a paradigmatic and flagship project of the Belt and Road Initiative, has charted a clear trajectory for economic activity along the corridor, flourishing under the collaborative efforts of China and Pakistan.

In response to emerging circumstances and challenges, and to further fortify the China-Pakistan all-weather strategic cooperative partnership, both nations have recently delineated five new corridors for the second phase of the CPEC. These corridors, identified at the thirteenth meeting of the China-Pakistan Economic Corridor Joint Cooperation Committee (CPEC JCC), are the Growth Corridor, the People’s Livelihood Corridor, the Innovation Corridor, the Green Corridor, and the Open Corridor.

The introduction of these five new corridors represents a significant expansion and refinement of the corridor’s developmental paradigm. This alignment with Pakistan’s economic development framework is poised to become a new impetus for the mutual development of China and Pakistan, signaling the commencement of a new phase of high-quality development in China-Pakistan relations. China is committed to perpetuating its traditional friendship with Pakistan, enhancing mutually beneficial cooperation, and expediting the construction of a closer China-Pakistan community of shared destiny in this new era.

The Growth Corridor aims to propel industrialization and stimulate economic growth. China and Pakistan will enhance the development of industrial parks, promote trade and investment, modernize industrial chains, and achieve rapid economic expansion within the Growth Corridor framework. Within the China-Pakistan Economic Corridor, industrial parks are pivotal in fostering industrial cooperation by attracting capital, promoting industrial upgrading, and providing a conducive environment for businesses and investors from both nations.

Aligned with the Growth Corridor framework, China and Pakistan have collaborated to plan and construct several industrial parks, equipped with optimal infrastructure. These parks attract enterprise investment through various incentives, including tax breaks, simplified land leases, streamlined administrative approval processes, and other initiatives designed to reduce operating costs and increase competitiveness. Such measures aim to expedite the rapid development of industries, enhance close cooperation, and deepen integration between the two countries.

To elevate living standards and enhance the overall well-being of citizens in China and Pakistan, the Corridor is dedicated to modernizing social security, healthcare, educational facilities, and public services. By leveraging the social and livelihood benefits of the China-Pakistan Economic Corridor project, both nations have completed priority projects in batches through special cooperation initiatives.

China and Pakistan have identified 27 priority social and livelihood projects in healthcare, education, poverty alleviation, and other areas of public welfare. The successful cessation of the Dasu hydropower project has alleviated energy tensions. Additionally, the Institute of Crop Science of the Chinese Academy of Agricultural Sciences has collaborated with relevant Pakistani institutions for over a decade, training nine researchers from Pakistan. On March 11, 2024, this joint effort culminated in the successful breeding of two wheat varieties suitable for cultivation in Pakistan’s northern regions.

The Innovation Corridor is focused on advancing collaboration in research and development, as well as fostering scientific and technological innovation. Through this corridor, China and Pakistan aim to establish collaborative research centers to promote university-research collaboration, drive scientific and technological innovation, and cultivate highly skilled labor.

Notable initiatives include the establishment of joint research centers such as the China-Pakistan Center for Geoscience Research at the Chinese Academy of Sciences and the China-Pakistan Joint Center for Geoscience Research. These centers are designed to advance technological innovation and scientific research, strengthen partnerships between research institutions and higher education establishments, and enhance research and development cooperation.

Efforts to promote scientific research and technological innovation have led to the creation of collaborative research centers like the China-Pakistan Joint Geoscience Research Center and the China-Pakistan Geoscience Research Center of the Chinese Academy of Sciences. Moreover, the collaboration between scientific research and higher education institutions has been reinforced by the development of science and technology parks, incubators, and laboratories that provide both physical space and technical support for innovation and entrepreneurship.

The Innovation Corridor also facilitates the transfer of cutting-edge scientific research results and technologies, encourages joint research and development of new technologies, and supports the upgrading of existing technologies. These initiatives are intended to inject new vitality into economic development.

The Green Corridor is a cornerstone of the second phase of the China-Pakistan Economic Corridor (CPEC), emphasizing agricultural sustainability, food security, and green development. This initiative aims to foster a path of green and low-carbon development, linking the “Green Silk Road” with the “Green Pakistan Initiative.” The first phase successfully addressed Pakistan’s power outage issues through energy projects. Corridor 2.0 seeks to enhance private sector participation and encourage Chinese enterprises to engage in renewable energy projects in Pakistan, such as wind power and photovoltaic systems. The corridor will introduce green financing mechanisms, such as carbon trading, and optimize the energy structure to support Pakistan’s sustainable development goals.

In addition to energy improvements, the second phase will increase agricultural productivity in Pakistan, advance the construction of Gwadar Port, develop mineral resources in Balochistan Province, and build two hydropower projects, Azad Patan and Kohala.

The objective of opening the corridor is to maintain its openness and inclusiveness, serving as an engine for economic growth and a booster for regional integration. It aims to become a new driver of economic development across Central Asia, South Asia, and West Asia. Adhering to the principle of trilateral cooperation (where all parties discuss, build, share, and benefit) the initiative seeks to strengthen cooperation with entities such as the United Arab Emirates, Qatar, and the World Bank, aiming for synergistic outcomes greater than the sum of individual efforts (1+1+1>3).

The corridor will also promote expansion into Afghanistan, facilitating regional interconnection and economic integration. To attract foreign investment in Pakistan, more reasonable foreign investment policies and related reform programs will be formulated. The Hongqilafu port will be open year-round to entice foreign enterprises to invest in Pakistan.

In the context of a new era and journey, the construction of the China-Pakistan Economic Corridor (CPEC) has progressed into a new phase characterized by high-quality development. However, this phase also encounters significant challenges: prominent security risks, internal political constraints within Pakistan, inadequate impetus for corridor construction upgrades, and increasingly complex external challenges.

To address these issues, it is imperative to develop five key corridors: Growth, People’s Livelihood, Innovation, Green, and Openness. Enhancing assistance to people’s livelihoods, initiating more small but beautiful livelihood projects, and increasing the export of agricultural products from Pakistan to China are crucial steps. Promoting agricultural demonstration cooperation between Xinjiang and Pakistan will also be beneficial.

Additionally, it is necessary to implement the upgrading and reconstruction of the No.1 railway trunk line and the rerouting of the Karakoram Highway to ensure the efficient operation of various special economic zones.

With the concerted efforts of both nations, the construction of the China-Pakistan Economic Corridor is expected to undergo a transformation, emerging as a high-quality demonstration project that epitomizes the joint construction of the Belt and Road Initiative.

*The authors are scholars affiliated with Baize Institute for strategy studies, Southwest University of Political Science and Law, P. R. China 

**The opinions in this article are the author’s own and may not represent the views of The Diplomatic Insight. The organization does not endorse or assume responsibility for the content.

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