Adeney Boni Pakistan and China Final 1

MAY 2021
How Pakistan and

China Negotiate
Katharine Adeney and Filippo Boni
How Pakistan and
China Negotiate
Katharine Adeney and Filippo Boni
© 2021 Carnegie Endowment for International Peace. All rights reserved.
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Cover Photo: Chris Hondros/Getty Images

CONTENTS
China Local/Global i
Summary 1
Introduction 3
The Economic Corridor Takes Shape 4
The Impact of the 2018 Pakistani Elections 10
Key Takeaways 22
Lessons Learned 23
About the Authors 25
Acknowledgments 25
Notes 26
China Local/Global
China has become a global power, but there is too little debate about how this has happened and
what it means. Many argue that China exports its developmental model and imposes it on other
countries. But Chinese players also extend their influence by working through local actors and
institutions while adapting and assimilating local and traditional forms, norms, and practices.
With a generous multiyear grant from the Ford Foundation, Carnegie has launched an innovative
body of research on Chinese engagement strategies in seven regions of the world—Africa, Central
Asia, Latin America, the Middle East and North Africa, the Pacific, South Asia, and Southeast Asia.
Through a mix of research and strategic convening, this project explores these complex dynamics,
including the ways Chinese firms are adapting to local labor laws in Latin America, Chinese banks
and funds are exploring traditional Islamic financial and credit products in Southeast Asia and the
Middle East, and Chinese actors are helping local workers upgrade their skills in Central Asia. These
adaptive Chinese strategies that accommodate and work within local realities are mostly ignored by
Western policymakers in particular.
Ultimately, the project aims to significantly broaden understanding and debate about China’s role in
the world and to generate innovative policy ideas. These could enable local players to better channel
Chinese energies to support their societies and economies; provide lessons for Western engagement
around the world, especially in developing countries; help China’s own policy community learn from
the diversity of Chinese experience; and potentially reduce frictions.
Evan A. Feigenbaum
Vice President for Studies, Carnegie Endowment for International Peace
CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | i

Summary
Since being officially launched in April 2015, the China-Pakistan Economic Corridor (CPEC) has
been one of the most watched set of projects under the aegis of Chinese President Xi Jinping’s
signature Belt and Road Initiative (BRI). Having already injected around $25 billion into Pakistan,
the CPEC not only has been dubbed the “flagship project” of the BRI, but it also holds a central role
in Beijing’s global ambitions.1
While much has been said about the geopolitical implications of the CPEC, including for both India
and the United States, less attention has been devoted to providing in-depth insights into the me-
chanics of how the BRI is unfolding on the ground in Pakistan. How do China and Pakistan negoti-
ate the terms of CPEC deals? To what extent has Islamabad managed to exert agency in its dealings
with Beijing? How does China adapt to the contexts it operates in? By now, the CPEC has been
subject to much media, academic, and policy scrutiny, but these questions have not been answered.
The power asymmetry between the two partners—coupled with the impression that the BRI rep-
resents a unidirectional Chinese endeavor, not just in Pakistan but also globally—has contributed to
the erroneous representation that Beijing is merely imposing the CPEC on its all-weather partners in
Islamabad. On the contrary, this study highlights China’s adaptive strategies in dealing with a host of
Pakistani actors (including political parties, local communities, and the military) against the back-
drop of Pakistan’s evolving political landscape and change in leadership following the country’s 2018
elections.
In filling this gap, this paper foregrounds the importance of adopting a relational approach to study-
ing how the BRI unfolds on the ground. This entails looking at how Pakistan and China have
negotiated the CPEC’s energy, infrastructure, and industrial cooperation projects. The analysis is
based on semi-structured elite interviews conducted by the two authors during three rounds of
fieldwork in 2015, 2018, and 2020–2021 triangulated with a host of official reports, statements, and
newspaper articles.
Examining the domestic contours of the CPEC shows that Pakistani actors have wielded agency in
important ways throughout the process, while Chinese actors at times have accommodated key
Pakistani demands.
• The CPEC’s chosen route was affected by partisan Pakistani politics. The decisionmaking
behind the corridor’s geographic route was an early indication that Pakistan’s preferences have
been key in shaping how the CPEC has unfolded on the ground. In particular, the choice to
prioritize projects in Sindh and Punjab stemmed from then prime minister Nawaz Sharif and his
party’s desire to obtain medium-term electoral gains, alongside China’s interests in developing
projects in Pakistan’s more economically developed provinces.
CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 1

• Despite its initial suspicions of the CPEC, the Pakistan Tehreek-e-Insaf (PTI) has been as
partisan in its use of the CPEC as its predecessor was. Since taking office in 2018, the PTI’s
focus on socioeconomic projects has not deviated markedly from the Pakistani government’s
previously formulated plans for the CPEC. But its choice of the Rashakai special economic zone
(SEZ) in Khyber Pakhtunkhwa, over others rated more favorably in feasibility studies (and
despite a strong Chinese preference for an alternative location), undermines the narrative that
China is always the one distorting market forces with ill-suited BRI projects.
• The development of Gwadar was as much of a priority for Pakistan as it was for China.
Although China’s strategic calculations are often emphasized, the port of Gwadar was a Paki-
stani-initiated proposal in the early 2000s that was only later rebranded as a BRI project after
2013. All Pakistani governments over the past twenty years, both military- and civilian-led, have
encouraged China’s involvement in Gwadar, while Beijing in turn sees the port as a strategic
access point to the Indian Ocean.
• Energy projects were initially prioritized by Pakistan’s choice. The majority of first-phase
CPEC investments went to energy projects, most notably coal power plants. This preference for
coal was part of Pakistan’s desire to diversify the composition of its energy markets. This goal was
also in line with Sharif ’s and his party’s preference for energy projects to end the country’s elec-
tricity shortages in order to secure a 2018 reelection bid.
• The challenges facing SEZs. Despite China’s and Islamabad’s agreement to focus on and priori-
tize a few SEZs and China’s desire to relocate some industries to lower-cost production areas, the
development of SEZs has been slow. This has been the result of a cumbersome bureaucratic
structure and the politicization of these projects.
• Rhetoric on the CPEC has often failed to match reality. The lofty language on the CPEC has
generally failed to measure up to the realities on the ground when it comes to delivering for the
people of Pakistan. Many projects aimed at winning Pakistani hearts and minds have been
included in the CPEC, but these have often not materialized or have been delayed.
2
Introduction
The China-Pakistan Economic Corridor (CPEC) is perhaps the most prominent of the investment
corridors for China’s infrastructure financing through its flagship Belt and Road Initiative (BRI).2
With at least $25 billion in total investment thus far, the CPEC encompasses the full spectrum of
infrastructure projects, including roads, ports, power plants, and fiber optic cables.3
The scale and nature of Chinese investments in the CPEC—formally launched in Pakistan in 2015
by Chinese President Xi Jinping—have involved Chinese actors in Pakistan’s domestic politics on an
unprecedented scale. Chinese officials propound the principle of “non-interference” in other coun-
tries’ “internal affairs,” yet since 2013, Beijing and its proxies, including Chinese firms and funds,
have stepped up their engagement with an array of Pakistani players at both the federal and local
levels.4 And although these Chinese actors have pursued their interests and sought to make their
political and investment preferences very clear, Pakistan’s domestic political context has compelled
them to adjust.
Since the CPEC began, China’s preference for a centralized decisionmaking process for its various
investments and projects has clashed with Pakistan’s preferences—and with Pakistani political reali-
ties. As the then convener of Pakistan’s Senate Special Committee on CPEC, Senator Sherry Reh-
man, has noted, “The divergence in processes between a centralized Chinese Communist Party
government and Pakistan’s nascent democratic parties and governance structures has been one of the
major roadblocks in the implementation of the economic corridor.”5
Although many observers portray Chinese activities in Pakistan as Beijing-driven, one-size-fits-all

endeavors, these projects and efforts actually have been shaped by complex interactions between the
interests of Chinese players and those of Pakistani political and economic actors.6 This paper aims to
explore these local effects by comparing Pakistan’s approach to the CPEC before and after the 2018
elections, which brought Prime Minister Imran Khan to power. This comparison demonstrates how
Chinese actors have adapted to Pakistan’s changed political situation.
The paper first explores the alignment and sometimes misalignment of Chinese and Pakistani goals
for the corridor and how Chinese players have had to adjust to Pakistani realities. The authors do
this, in part, by analyzing discussions on how the kinds of key projects prioritized by the Joint
Cooperation Committee (JCC), the chief decisionmaking body within the CPEC’s institutional
framework, changed course after the country’s 2018 elections. The shift away from projects focused
mostly on energy generation to a broader set of initiatives aimed at bolstering socioeconomic devel-
opment, although it already had been heralded by China and Pakistan in the Long-Term Plan for
China-Pakistan Economic Corridor (2017–2030), was partly a function of the pressure brought to
bear on Beijing by domestic Pakistani actors.7 The paper elaborates on these dynamics and Beijing’s
responses and adaptive strategies.

Next, the paper assesses the corridor’s implementation of special economic zones (SEZs), one of the
key components of the second phase of the CPEC. The SEZs operate under a Federal Board of
Approval, which includes the Pakistani prime minister, relevant federal ministers (including the
minister of finance), the chief ministers of Pakistan’s provinces, and the governor of the State Bank of
Pakistan.8 In exploring the dynamics between Chinese investors and local interests within these
SEZs, the authors show how priorities have been mediated between the Pakistani and Chinese sides
and resulted in negotiated outcomes, rather than simply terms imposed by Beijing.
The Economic Corridor Takes Shape
Before 2018, Pakistani politicians and officials were much less prepared for detailed negotiations on
the CPEC than their Chinese interlocuters were. As Punjab’s chief economist told the authors, the
Chinese negotiators arrived with well-formulated plans, while their Pakistani counterparts had not
sorted out their priorities.9 This view aligns with the analysis of Arif Rafiq, who has argued that the
Pakistan Muslim League-Nawaz (PML-N) government led by then prime minister Nawaz Sharif was
“woefully deficient in terms of planning and project prioritization.”10 It was the Chinese negotiators,
Rafiq continued, “who seem to have played a lead role in conceiving the long-term CPEC plan” and
the “masterplan” for the Gwadar Port and associated infrastructure projects in the Pakistani province
of Balochistan.11
Despite this shaky start, however, Pakistani politicians soon identified areas where they could leverage
proposed Chinese investments to their advantage and in ways that reflected their own priorities.
The Routes of the Economic Corridor

Beijing and Islamabad needed to reach an agreement on the corridor’s routes and the billions of
dollars in investment that were at stake. Making the CPEC a genuinely national and equitable
initiative would have meant siting projects in all four of the country’s provinces. However, although
the Pakistani government initially hewed to the rhetoric of an “all-Pakistan” effort, this stance did not
last long.12
Major Pakistani stakeholders, including federal and provincial politicians and business actors, pushed
to secure projects for their home regions. Not surprisingly, controversy ensued. Pakistan’s opposition
and regional parties sometimes opposed the early CPEC siting decisions, but to no avail. The
PML-N saw the CPEC as its ticket to reelection.13 The ruling party prioritized spending and invest-
ment for its Punjab heartland, which happens to hold the most seats in the National Assembly.14 The
CPEC’s eastern route came to run through the provinces of Punjab and Sindh, including many of
the political constituencies of PML-N members of parliament (see photo 1). This arrangement left
4
PHOTO 1
Chinese and Pakistani policymakers
opted for an eastern route for the
CPEC that ran through major
population centers (like the city of
Lahore) in Pakistan’s more populous
provinces of Punjab and Sindh.
(Katharine Adeney)
the provinces Balochistan and Khyber Pakhtunkhwa out in the cold, even though Balochistan was
then ruled by a coalition that included the PML-N.
In this case, the Pakistani government’s preference happened to mesh well with the technical con-
cerns of its Chinese interlocuters. As one interviewee has argued, “The Chinese expressed their desire
to work on existing road networks without building new ones from scratch.”15 And Punjab, in
particular, had attractive development potential.
As the CPEC’s top decisionmaking body, the JCC was a prominent venue for these negotiations. The
committee is co-chaired by the Pakistani minister of planning, development, and special initiatives
and the vice chairman of China’s National Development and Reform Commission. Several joint
working groups (on Gwadar, energy, and transport infrastructure, for example) convene in between
the JCC meetings and make recommendations to the full committee.16
The official minutes of JCC meetings corroborate this alignment of Pakistani political interests with
Chinese commercial and technical concerns. For instance, in February 2014, based on the recom-
mendations of the joint working group on transport infrastructure, the JCC “reached consensus on
the alignment of [the] CPEC, and Kashgar of Xinjiang, Khunjerab, Islamabad, Lahore, Multan,
Sukkur, Karachi and Gwadar are confirmed as pivot cities initially.”17 In other words, Chinese and
Pakistani decisionmakers zeroed in on cities located in Punjab and Sindh with the single exception of
the flagship Gwadar Port (see photo 2).
The notes from that same JCC meeting also mentioned that the attendees decided on the “principles
of connecting main economic areas [to] pivot cities; making full use of existing transport infrastruc-
ture for the development of [the] CPEC where feasible; and initially focusing on the upgrading and

PHOTO 2
Chinese investment in the CPEC
has bankrolled major infrastructure
projects in several Pakistani urban
centers, including the country’s first
metro line in the city of Lahore,
which opened in October 2020.
(ARIF ALI/AFP via Getty Images)
rebuilding of existing lines for railway construction.”18 Ultimately, then, the choice of route reflected
the combination of Chinese priorities and the Pakistani government’s domestic agenda.
Energy Projects
The CPEC’s strong early focus on energy generation sprung primarily from Pakistan’s own domestic
political priorities. Energy came to be the very heart of the CPEC’s initial phase largely because of a
dramatic energy crisis that was affecting the lives and livelihoods of Pakistanis, the country’s macro-
economy, and (as a result) the electoral prospects of those in power. The promise to solve the “energy
crisis” was a key electoral manifesto commitment of the PML-N’s 2013 campaign.19 As Punjab’s chief
economist explained, “energy was the pre-requisite” to everything the PML-N hoped to achieve both
developmentally and electorally.20
The fact that Pakistan pushed its energy priorities onto Beijing rather than the other way around is
demonstrated by the minutes of the first JCC meeting in August 2013. The Pakistani side “shared
[that] the energy sector is the most important and critical sector and without its revival, economic
activities cannot be re-generated in the country.”21 In the same meeting the vice chairman of China’s
National Development and Reform Commission agreed to take cues from Pakistan by “affirm[ing]
that the projects . . . identified by the [Pakistani] Minister [would] . . . be the basis for future bilateral
cooperation under the corridor.”22 However, Chinese officials warned that both sides would need to
ensure the high efficiency of projects to maximize their benefits when making specific investment
decisions within that Pakistan-set prioritization framework.23
Within the energy sector, coal would play a key role (see table 1).24 The Pakistani authorities clearly
dictated this priority, and their Chinese counterparts adapted accordingly. For instance, the National
6
TABLE 1
CPEC Coal Power Projects
Project Name Location Estimated Cost Executing Completion

(U.S. dollars) Company/Sponsors Status
Sahiwal coal-fired Sahiwal, Punjab $1.9 billion Huaneng Shandong Completed in
power plants Rui Group (China) October 2017
Coal-fired power Port Qasim, Sindh $1.9 billion Port Qasim Electric First unit: November
plants at Port Qasim Power Company 2017; second unit:
(near Karachi) (Private) Limited April 2018
HUBCO coal power Hub, Balochistan $1.9 billion China Power Hub August 2019
project Generation Company (Inaugurated by the
(Private) Limited prime minister in
October 2019)
Engro Thar coal Thar-Block-II, Sindh $995.4 million Engro Power Gen July 2019
power project Thar Ltd.; China
Machinery
Engineering
Corporation
SSRL Thar coal Thar-Block-I, Sindh $1.9 billion Shanghai Electric In progress (target
Block-I (6.8 million Power Company date is February
tons per annum) Limited; China Coal 2023)
power plant Technology and
Engineering Group
Corporation; and
Sino Sindh Resources
Private Limited
HUBCO Thar coal Thar Block- II, Sindh $497.7 million Thar Energy Limited In progress (target
power project (Thar date was March 2021)
Energy)
ThalNova Thar coal Thar Block- II, Sindh $497.7 million ThalNova Power In progress (target
power project Thar (Private) date was March 2021)
Limited
Imported coal- based Gwadar, Balochistan $542.3 million China In progress (no target
power project at Communications date specified)
Gwadar Construction
Company
SOURCES: the CPEC (official website) and various news sources

Power Policy 2013, one of the very first policy documents approved by the newly elected PML-N
government in July 2013, called for the exploration of a “coal corridor.”25
This plan was made to generate cheaper electricity and to diversify the country’s energy sources with
the goal of reducing its overreliance on oil. Accordingly, 47 percent (eight out of seventeen) of the
prioritized energy projects under the CPEC between 2013 and 2021 were for coal-fired power
plants. These projects accounted for 65 percent of the projected megawatts of power that CPEC sites
would produce, a potent reminder of the centrality that the Pakistani government attached to the
role of coal.26
Pakistani leaders were not only steering the types of projects that received investment but were also
asking Chinese firms to speed up the construction of various projects. The Pakistani government put
pressure on the Power Construction Corporation of China (PowerChina), the state-owned enterprise
(SOE) that holds a 51 percent stake in the project, to rapidly develop the Port Qasim coal-fired plant
so it would be ready ahead of the 2018 elections.27 The power plant was eventually connected to the
country’s electrical grid in just thirty-two months, and the Port Qasim coal power plant began
commercial operations sixty-seven days ahead of schedule and ahead of the July 2018 elections.28 In
brief, the power generation projects that dominated the first phase of the CPEC were the result of
Chinese accommodations of Pakistani political and economic priorities.
The Port of Gwadar

The project that best captures the combination of local agency and Chinese adaptation is the port of
Gwadar in Balochistan, the jewel in the CPEC’s crown. To many Indian and U.S. policymakers,
Gwadar epitomizes China’s military ambitions and expansionism. However, the development of the
Gwadar Port is better understood as a Pakistani, not a Chinese, story. The project was first initiated
by Pakistani elites who have long sought to build infrastructure that could help the country counter-
balance its archrival, India—a cause to which China has been receptive over many years. Like other
projects along the BRI’s routes, Gwadar, too, started much earlier than the advent of Xi’s signature
initiative.
The first proposal to develop Gwadar as a port was put forward not by Beijing but by then Pakistani
president General Pervez Musharraf during his first visit to China in January 2000. In fact, Beijing
was skeptical of Musharraf ’s proposal, since Gwadar was located in a remote area and was discon-
nected from the major transport routes that have been China’s focus. The general’s Chinese inter-
locuters also looked askance at the project due to its modest commercial prospects and its location in
a region—Balochistan—with strong and long-standing separatist sentiments.29
8
China eventually came around, in part because the project was such a high priority for its Paki-
stani partners. By the time of his May 2001 visit to Pakistan, then Chinese premier Zhu Rongji
announced that Beijing had decided to invest in the port, with the completion of the project’s
first phase slated for 2006.30 Following the inauguration of the port in January 2007, however, six
years of inaction followed during which operations were handed over to the Port of Singapore
Authority, which failed to deliver on further development at the port site. As one interviewee
noted, the Pakistani government “gave it to [the] wrong organization, the Singapore Port
Authority. They were not able to deliver, they were not able to run it, [and] they were not able
to keep their commitment.”31
After Pakistan’s return to democracy, the February 2008 elections culminated in the victory of the
Pakistan People’s Party (PPP), and the new government was determined to develop economic ties
with China and to see the project through. As such, Pakistan once again offered Gwadar to China
when then prime minister Yousaf Reza Gilani visited Beijing in the immediate wake of the May 2011
U.S. raid that killed al-Qaeda leader Osama bin Laden in the Pakistani city of Abbottabad.32 Islam-
abad’s initial offer allegedly included developing a military base at Gwadar, or as then defense
minister Chaudhary Ahmed Mukhtar announced, “We have asked our Chinese brothers to please
build a naval base at Gwadar.”33 China, however, denied these claims. As the New York Times put it,
Mukhtar’s statement was seen by some “as a pointed, if graceless, effort to send a message to the
United States that Pakistan had other options should its foundering relationship with Washington
prove beyond repair” after bin Laden was killed on Pakistani soil.34 Since then, both China and
Pakistan have downplayed the military development of Gwadar.
In February 2013, the China Overseas Port Holding Company officially took over the management
of the port. Even though this happened during the tenure of the PPP government, the importance of
Gwadar to every Pakistani government, regardless of political persuasion, has remained a constant for
more than twenty years.35 The relevance of the port for Pakistan relates to several factors, including
the country’s rivalry with India and the potential to use Gwadar for trade through Afghanistan and
Central Asia. The port has been and is a regular topic of discussion at the JCC meetings, with Beijing
acceding to various Pakistani construction requests.
Thus, during the first JCC meeting in 2013, the chairman of Pakistan’s National Highway Authori-
ty—the agency tasked with the implementation of road projects under the CPEC—suggested that
upgrading “the Makran Coastal Highway to link Karachi with Gwadar” should be a key priority.36 In
his own concluding remarks at the same meeting, the vice chairman of China’s National Develop-
ment and Reform Commission argued for “giving priority” to projects that would support a plan for
“Gwadar port’s sustainable development.”37 (Beijing has placed a recurring emphasis on sustainable
development, a point to which this paper will return.) As evidence of the importance Chinese actors
placed on Pakistan’s requests, the two sides agreed at the third JCC meeting on August 27, 2014, to

sign a government-to-government framework agreement, which included the Eastbay Expressway
linking Gwadar to Karachi through the Makran Coast.38
To be sure, some of the prioritized projects, including the Eastbay Expressway, aimed to address
Beijing’s original concerns about the lack of connectivity around the port and its geographic isolation
from Pakistan’s transport networks. To put it differently, Beijing has not simply accepted Pakistani
requests that lacked any underlying commercial or logistical logic. In addition, the Eastbay Express-
way was financed by an interest-free Chinese government loan.39 This arrangement was in sharp
contrast to the concessional loans and independent power producer plans that financed other early
harvest CPEC projects.40 This reflected China’s desire to both meet Pakistani demands and pursue its
own strategic considerations to develop what Chinese analysts consider a “strategic strongpoint” in
the Indian Ocean.41
In summary, the first phase of the CPEC (2013–2017) is a potent example of negotiated outcomes
between Pakistan’s evolving preferences and China’s own adaptive goals and priorities. The way the
CPEC route was the result of the PML-N’s and China’s goals, the prioritization of coal projects in
line with Pakistan’s requests, and developments at the port of Gwadar (especially about building road
links with Pakistan’s highway network) all demonstrate this point.
The Impact of the 2018 Pakistani Elections
For decades, China’s relations with Pakistan were primarily channeled through the Pakistani military,
and the security relationship was the backbone of China-Pakistan relations writ large.42 These securi-
ty-centric ties persisted even when Pakistani governments sought to inject a greater emphasis on
development and economic goals into the bilateral relationship. Most notably, the PPP government
that ruled from 2008 to 2013 was keen to develop closer economic ties with China, although Beijing
was initially more reluctant to work with the PPP leadership as it was perceived to be close to the
United States.43
The advent of the CPEC altered these dynamics. In Sharif ’s PML-N government, which took office
in June 2013, the Chinese leadership found a civilian partner willing to push ahead with large-scale
infrastructure priorities of the type that China had begun to finance in South Asia and around the
world. By concentrating project decisionmaking in the JCC, a civilian-led body, China began to
build significant relationships in Pakistan beyond the military.
For both sides, this post-2013, civilian-focused arrangement proved to be congenial. For China, the
JCC structure suited its desire to move decisions rapidly through Pakistan’s fractious political system
and implement CPEC projects expeditiously. For the PML-N’s part, meanwhile, the JCC nicely
10
suited the party leadership’s ambition to maintain civilian control of strategic commercial and
development projects.
However, this equilibrium soon bumped up against the complex realities of Pakistani politics—above
all, the continuing constraint of indirect military interventions in domestic politics. The military’s
shadow loomed large over a July 2017 Supreme Court decision to disqualify Sharif from holding
office over corruption charges.44 China’s foreign ministry put a brave face on this turn of events,
stating that his disqualification from political office would not affect the CPEC.45 Yet credible reports
suggested that, behind the scenes, Beijing was unhappy with the decision to remove the prime
minister from office, worrying that it would “bring some variable factors to the CPEC project.”46
A first signal of such turbulence came at the seventh JCC meeting, held in Islamabad in November
2017, the body’s first meeting at which no major infrastructure projects were agreed on. That discon-
tinuity between the prior period, when the JCC approved major deals, and the stasis and indecision
that began with Sharif ’s removal would become even more marked under the successor Pakistani
national government of the Tehreek-e-Insaf (PTI) party under Khan.
The year 2018 was a transitional moment for the CPEC and for Chinese engagement with Pakistan
generally. The PTI came to power after the July 2018 elections. Led by Khan, a former cricket hero,
the party campaigned extensively on a so-called “New Pakistan” platform anchored in a strong
anticorruption agenda. Between 2013 and 2018, Khan and other prominent PTI leaders had ex-
pressed reservations about the CPEC. In particular they had criticized their predecessors’ decision to
route the CPEC through Punjab (rather than an alternative western route) and had alleged that
PML-N politicians had personally benefited from the Chinese investments.47
In Khan’s election victory speech, he praised China’s domestic poverty alleviation strategy, extolled
Xi’s anticorruption drive, and argued that “China gives us a huge opportunity through [the] CPEC,”
but he made no reference to specific China-backed infrastructure projects in Pakistan itself.48 This
omission raised questions about the future of infrastructure projects that had been the focus of the
first phase of the CPEC from 2013 to 2017. Khan leavened this message by hinting that the new
PTI leadership was prepared to accommodate a new set of priorities within the CPEC. He suggested
that projects that were currently underway should be completed but that the PTI’s agenda, not the
PML-N’s, would dominate the discussion of future phases of the initiative.49
The PTI government conveyed this message to Beijing over several meetings with then Chinese
ambassador Yao Jing in the immediate wake of the elections. In his very first encounter with Khan,
Yao shifted tack by paying rhetorical service to the proposition that the PTI “pursues the notion of
governing for the well-being of its people and hopes that China will keep supporting Pakistan’s
economic and social development.”50 In that context, Yao expressed China’s openness to “work

together with the new government” and delivered the same message in meetings with newly minted
PTI ministers, including the minister for railways and the prime minister’s adviser for commerce and
investment, Abdul Razak Dawood.51 As Andrew Small argues, the Chinese “spent the first period
after the elections trying to be accommodating in order to ensure that [the] CPEC stayed on track.”52
This Chinese nod to the PTI’s developmental priorities did not keep Beijing from becoming a
football for dueling Pakistani politicians to trade politically motivated charges and countercharges.
Only a few days after meeting Yao, and while Yao’s boss, Chinese Foreign Minister Wang Yi, was
visiting Pakistan, Dawood was quoted by the Financial Times saying that the PML-N “did a bad job
negotiating with China on [the] CPEC” and conceding that ill-advised tax breaks to Chinese compa-
nies allowed them to gain “an undue advantage in Pakistan.”53 Dawood concluded that Pakistan
“should put everything on hold for a year so we can get our act together.”54
Political twists and turns ensued, as the Pakistani military, with an eye on Beijing, pressured Khan to
publicly retract Dawood’s comments the next day, and the new minister for planning reiterated a
prioritized commitment to the “robust development of Gwadar . . . with a special focus on rapid
industrialization.”55 Still, the mere fact that Beijing had to rely on the Pakistan Army to put some
heat on the new government was symbolic of the change in domestic interlocutors, after years of
building relationships with civilian partners and leaders.
Within days, Beijing was forced back into using its pre-2013 playbook, as Yao publicly enlisted the
help of Pakistan’s Chief of Army Staff General Qamar Javed Bajwa, who also reaffirmed the military’s
commitment to the CPEC during a long-planned visit to China, including a meeting with Xi, just
one week later.56 When asked about the changed priorities of the PTI government toward the CPEC,
a senior bureaucrat in Islamabad argued that the new government simply did not understand policy-
making and revealed that the “army chief [had to brief ] the cabinet about the real economic issues of
Pakistan” to get the process back on track.57
At the same time, the new government announced changes to Pakistan’s Public Sector Development
Program (PSDP), the principal source of development funding deployed annually by the Pakistani
government.58 These changes to the PSDP demonstrate clear differences in priorities between the
PML-N and PTI governments, although these changes were also made with the knowledge that
Pakistan would be shortly seeking a bailout from the International Monetary Fund. Chinese officials
would have to adjust to their Pakistani counterparts’ revised narrative on socioeconomic develop-
ment.59 The PTI removed 35 percent of the country’s capital and development projects (a total of
455) from its new development plan, including sixteen China-backed projects under the CPEC
(twelve projects in Gwadar and four broader CPEC proposals beyond the port).60 These changes
reduced the overall PSDP allocations to the CPEC by roughly 20 billion Pakistani rupees (approxi-
mately $125 million) in the 2018–2019 PSDP.61
12
In such a fluid situation, it is not surprisingly that the December 2018 and November 2019 JCC
meetings, therefore, yielded no major new capital projects. Instead, these meetings focused mostly on
completing the projects already underway and shifted the emphasis to the PTI’s priorities by turning
toward prospective new investments in SEZs. In February 2020, Yao nodded to this shift by noting
that “the new real aspects of [the] CPEC basically demonstrate Mr. Imran Khan’s vision of the
economy,” adding that “more focus is [now being] given to industrial cooperation” and acknowledg-
ing the need to “engage more [with] the private sector.”62
In short, although Beijing’s initial response to the change of government was to engage again with
the Pakistan Army, China ultimately settled on a more adaptive, accommodative, and PTI-friendly
strategy. This Chinese adaptation would partly address socioeconomic development while simultane-
ously moving forward on industrial cooperation, most notably through the creation of SEZs.
The Rise of SEZs

One notable element of the CPEC since 2018 has been a renewed emphasis on SEZs. These entities
have been introduced in many countries, despite skepticism from the World Bank and others about
whether they improve economic development more than the national average.63 It is important to
note that the creation of SEZs was already mentioned even before the 2018 election in the Long-
Term Plan for China-Pakistan Economic Corridor (2017-2030), which was agreed on under the
previous PML-N government, as a major second-phase priority for the CPEC.64 Even before the PTI
took power, therefore, Pakistan viewed the zones as a means of enabling “industries to smooth supply
chains, enhance collaboration and innovation capabilities, and help reap significant economies of
scale.”65
From Beijing’s perspective, meanwhile, access to Pakistan through SEZs would have the secondary
benefit of allowing Chinese investors to re-export “because [of ] “Pakistan’s GSP+ access to the EU.”66
In addition, investing in SEZs would enable China to take advantage of Pakistan’s cheaper labor costs
and relocate some of its “sunset industries” to Pakistan, as its own industries back in China moved up
the value chain (although it is important to stress that Pakistan was not the only possible relocation
candidate for these Chinese firms).67
At the 2016 JCC meeting, Pakistan (under the PML-N government) and China agreed to nine new
SEZs.68 In keeping with the rhetorical commitment to a whole-of-Pakistan CPEC narrative, these
SEZs initially were spread across the country more widely than those first adopted in 2012.69 The
federal government proposed “industrial parks in all four provinces,” with just one of the SEZs
located in Sharif ’s home province of Punjab along with two in Sindh, one in Balochistan, and one in
Khyber Pakhtunkhwa; they also proposed that SEZs also be located in the administrative territories
of the Islamabad Capital Territory (one), Gilgit Baltistan (one), Azad Jammu and Kashmir (one), and

the (former) Federally Administered Tribal Areas (one).70 The minutes of the December 2016 JCC
meeting recorded the “priority list of locations of special economic zones shared by the Pakistani
side.”71 Although the minutes noted that “experts on industrial zones from China shall visit Pakistan
in early 2017 to advise the Pakistani side on the most suitable locations,” it was Pakistan, not China,
that pushed for these particular locations.72
However, at the seventh JCC meeting in November 2017, differences emerged as to which SEZ sites
should be prioritized. Beijing wanted the Thatta (Dhabeji) site (in Sindh), the Hattar site (in Khyber
Pakhtunkhwa), and the M3 Faisalabad site (in Punjab) to be prioritized, while Pakistan strongly
advocated moving ahead on the Rashakai site (in Khyber Pakhtunkhwa) and the Sheikhupura zone
(in Punjab)—the latter for parochial political reasons related to the PML-N’s Punjab heartland.73
Meanwhile, China’s preferences reflected an interest in quick wins. As Hasaan Khawar, a journalist at
the Express Tribune has noted, despite a common misperception, “the Chinese never requested . . .
[that] Pakistan [offer] exclusive industrial enclaves under [the] CPEC. Their preference for [the] M3
and Hattar industrial estates, with a number of pre-existing industries, makes this evident.”74 No
decision was reached on the location of the SEZs at this meeting.
Jobs, Centralization, and the Limits of China’s Power During Khan’s Tenure
When Khan eventually warmed to the CPEC (under pressure from the Pakistani military), he sought
to refocus it around SEZs and projects that meshed with his populist agenda of increasing local
employment and building up local businesses. Although SEZs had always been envisaged as a sec-
ond-phase priority under the PML-N government, Khan’s PTI came to view them as a means to
deliver on his populist promise of “creating 10 million jobs and strengthen[ing] the Labour market.”75
As Khan put it in 2020, his “government’s interest is definitely to provide job opportunities to the
locals at their doorsteps.”76 This goal also embodied an ambition to “transform” the areas around the
SEZs, benefiting local residents.77
At the eighth JCC meeting in December 2018, the first meeting after the PTI came to power,
Chinese officials finally accepted that Rashakai would be one of the three SEZs prioritized as “key
projects.”78 Chinese actors accepted this outcome even though the feasibility studies provided to the
sixth JCC meeting had ranked Rashakai lower than Dhabeji (in Sindh), Hattar (in Khyber Pakh-
tunkhwa), or Faisalabad (in Punjab), and even though the existing economic zone at Rashakai had
been described as a failure by analysts.79 As Small has argued, at the eighth JCC meeting, the Chinese
participants were concerned that “there was a respectable public narrative around [the] CPEC in
place for the second Belt and Road Forum.”80
14
Nonetheless, Khan was determined to focus Chinese attention on this zone, located 70 kilometers
from Peshawar, for partisan political reasons.81 The provincial government in power in Khyber
Pakhtunkhwa, led by Khan’s party (Tehreek-e-Insaf ), was a strong advocate for the SEZ’s adoption as
it was located in the constituency of the chief minister.
Although Pakistan accepted China’s preferred sites of Dhabedi and Faisalabad at this meeting, the shift
from Sheikhupura to Faisalabad was occasioned by Pakistani political changes. After the change in
political power in Punjab from the PML-N to the PTI, feasibility studies on an SEZ at Sheikhupura
revealed “some serious issues.”82 The new government realized that “more than 200,000 resided in the area
and the land was privately owned” so it could not simply be allocated to the SEZ.83 As such, this siting
modification was the result of the shift in power in Punjab’s provincial government from the PML-N to
the PTI, not shifting Chinese preferences. See table 2 for a full listing of the key prioritized SEZs.
TABLE 2
The CPEC’s Prioritized Special Economic Zones
Province/Area Location Progress

Punjab M3 Industrial City (Faisalabad) Groundbreaking took place in
January 2020
Khyber Pakhtunkhwa Rashakai Economic Zone on M1 Development agreement signed in
September 2020
Sindh Dhabeji Special Economic Zone Looking for a new developer; road
and gas connections are being
finalized
Balochistan Bostan Industrial Zone Officially named a CPEC SEZ in
March 2020
Gilgit Baltistan Moqpondass SEZ (Gilgit) Post–feasibility study stage;
provincial government is
managing authority of the SEZ
Federal Government ICT Model Industrial Zone (Islamabad) Land finalization stage
Federal Government Development of industrial park on Pakistan Feasibility study assessment stage
steel mill land in Port Qasim near Karachi
Azad Jammu and Kashmir Mirpur Industrial Zone Feasibility study underway
Federally Administered Mohmand Marble City Feasibility study underway
Tribal Areas (now merged
into Khyber Pakhtunkhwa)
SOURCE: A variety of official Pakistani government documents and related news articles.

Of the nine SEZs on the CPEC’s priority list in 2016, three were accepted as elevated priorities at
the 2018 JCC meeting: Rashakai in Khyber Pakhtunkhwa, Dhabeji in Sindh, and Faisalabad in
Punjab. All three were the preferred options of the Khan government. China’s preference for the
Hattar industrial park as the more viable and efficient option was eventually abandoned, and the
Rashakai project, adopted for political rather than economic reasons, was accepted instead.84 This is a
clear example of how an economically inefficient project was driven by Pakistani domestic political
concerns, a development that runs counter to the common narrative that China is typically the one
distorting market forces.
The discourse on the development of the SEZs has been related to economic cooperation, skills
training, and employment. However, it is extremely difficult to independently verify the claims made
about employment levels in and nearby the SEZs. For instance, in January 2020, the Faisalabad
Industrial Development and Management Company (a company established by the provincial
government that develops and upgrades industrial estates) claimed that the Faisalabad SEZ “will
absorb more than 400,000 skilled workers in four years” and provide training centers for workers
within the SEZ.85 The government-funded CPEC Centre for Excellence estimated in 2018 that 1.2
million jobs would be created by 2030.86 A similar narrative was echoed in December 2020 by
Chinese Consul General Li Bijian, who argued that “investment would bring development and jobs
for [the] local population and also . . . will improve civic facilities. With industries, locals will in-
crease their incomes and would have better services.”87
Many experts question these projections, however. As Zahra Beg, representing a widespread view
among analysts, put it, “Locals, if hired, are in lower positions, often suffering major salary discrep-
ancies.”88 Interviewed at the end of 2020, the journalist Khawar said that the situation has remained
much the same: “[The] Chinese say they can’t find high-tech or specialized labor in Pakistan. So
wherever they can’t find local labor, they bring in Chinese [workers].”89 He was optimistic, however,
that with time this would change. A senior political appointee in Lahore agreed that if a project
needs to be completed quickly, Chinese labor tends to be used, but in the long term he believed that
there would be a shift to Pakistani labor.90 However, no reasons were given to support this assertion.
For its part, China has gone some way to try to address these long-standing concerns surrounding
job opportunities within the CPEC. The manager of the Shaanxi Huashan Construction Group
Company, tasked with the construction of two additional lanes to the N-55 highway, said that his
company “adhere[s] to the localized operation mode. [The company] strives to train local technical
workers and management talents.”91 China has shown itself aware of the sensitivities surrounding
(the lack of ) local employment opportunities, but it is much less clear whether this awareness is
translating into more than public statements.
16
One of the most important features of the handling of the CPEC under Khan has been more cen-
tralized political control. This was the result of China’s increasing concerns about the slow progress of
many CPEC projects, coupled with long-standing requests from Pakistan’s powerful military to
increase its role in the handling of the CPEC. Although the PML-N government also sought to
centralize its control of the CPEC, it insisted on a civilian-led centralization of authority and rejected
the Pakistani military’s demand “for a CPEC Authority with greater military involvement.”92
In terms of the management of the SEZs, although the Board of Investment is “responsible for the
co-ordination of all activities pertaining to SEZs, developers and zone enterprises” and was designed
to “facilitate the interaction of developers and zone enterprises” with all other government entities,
Pakistan’s provinces still retain significant powers.93 This includes the need for a Chinese investor to
win approval from the provincial building control authority, which retains the responsibility for
developing the zones.
The lack of a “one window operation” for facilitating SEZs within the CPEC has been extensively
criticized. As an industrialist reported to a trio of researchers, “there should be one place where
people can go and submit documents—what happens behind that window is [the] government’s
issue and they should speed up the work, link the departments and get the work done; otherwise the
current system is not built to create ease.”94
As a response to domestic and Chinese criticisms about the lack of progress, in the wake of the
eighth JCC meeting in December 2018, the Pakistani federal government is now spearheading the
project, at least in public. This means, in part, that the federal government is now providing utilities
to the SEZs, which is a joint federal and provincial responsibility in Pakistan.95 There has been talk of
amending the SEZ Act again, as the prime minister’s special adviser on commerce has argued that
changes need to be made to address the “slow pace of development and lack of utilities in the SEZs,
[the] complicated approval process, cumbersome procedures for availing the incentives, lack of clear
policy objectives, absence of one window operations and others.”96
There are real capacity issues but because of the status of the CPEC as the “flagship” of the BRI,
China has had to confine its concerns to bilateral meetings. Even with its financial muscle, China has
not been able to accelerate progress, although the January 2021 proposal to create a Pakistan-China
joint parliamentary committee to oversee individual CPEC projects heralds a probable change in
approach.97
China is concerned that progress has been extremely slow in developing the three prioritized SEZs. A
groundbreaking ceremony only took place in Faisalabad in January 2020, and the “development
agreement” for Rashakai was signed only in September 2020.98 Dhabeji was only approved “in
principle” in October 2020.99

Even before the challenges posed by the coronavirus pandemic, CPEC Project Director Hassan Daud
Butt’s statement in November 2019 that “we expect to finish development work in one year [on the
SEZs] to enable Chinese investors [to] start relocating their manufacturing units here” was wildly
optimistic.100 A more realistic assessment was given by the chair of the Parliamentary CPEC Com-
mittee, an oversight body comprised of members of both houses of the Pakistani parliament who
said, “we make sure they are inaugurated when they are ready,” by which he meant when they had
investors.101 This reality was confirmed by a provincial bureaucrat who noted that, unless there was
interest from investors, nothing happens: “If advances flow in then everything speeds up.”102
China has therefore had to adapt to dynamics on the ground in Pakistan. A repeated concern has
been that there is no “suitable business environment” for Chinese companies and that there is a “trust
deficit.”103 A Punjab government official reported that Chinese companies “come here looking for
plug-and-play facilities. When we cannot offer them this facility, they move on to other countries.”104
As Li Bijian, the Chinese consul general in Karachi, opined in February 2020, “We can’t order
private investment. Yes, we are encouraging companies. We know well that it will not be persuasion
but the profit expectation and risk coverage that will mobilise them. We are engaging with the
relevant quarters in Pakistan to work out an incentives package for Chinese investors in special
economic zones (SEZs).”105 This statement aligns with an interview with a Western diplomat in 2020
who questioned why Chinese companies would invest in the SEZs, given that “all companies, not
just the Chinese, are [being] offered preferential rates.”106
China has not been able to secure a “suitable business environment” for its sunset industries and,
despite pressure, Beijing has not yet been successful in encouraging Pakistan to change the legal
framework in the SEZs to facilitate its investment.107 Although there are reports of progress in the
Rashakai SEZ, with the construction of a steel unit, the provision of facilities and infrastructure for
the SEZ have not progressed as quickly as Chinese officials had expected.108
China still believes that regulatory changes are needed to encourage Chinese investment in the SEZs.
One journal article in an elite Chinese university argued that as well as “cutting [down] delays [and]
bureaucratic hurdles . . . the Pakistani government ought to accord complete and secured property
rights protection to . . . attract Chinese firms . . . [and that it should] negotiate with [the] Chinese
government to secure duty-free status to exports originating from the SEZ.”109 It is likely that, unless
Chinese concerns are addressed, investment into the SEZs by Chinese firms will be slow, although
any such investments presumably will be heralded as evidence of the success of the SEZs.
Gwadar
In contrast to the slow progress on SEZs, a different model has been underway in Gwadar (see photo
3).110 After the China Overseas Ports Holding Company took over the management of the port, the
18
PHOTO 3
China has invested billions to meet
long-standing Pakistani requests to
help turn the port of Gwadar into a
regional hub for trade. (AAMIR
QURESHI/AFP via Getty Images)
company “leased over 650 acres of land . . . to build and operate” a Free Trade Zone.”111 Unlike the
SEZs, the free trade zone operates as “a free port . . . similar to [how] Hong Kong [operates].” China
receives 91 percent of the profits from the port, which it will run for forty years under a “build-oper-
ate and transfer model [sic].”112
Projects in Gwadar featured prominently in the JCC meetings, particularly at the fourth JCC meet-
ing in March 2015. What is striking about the minutes from that meeting is the stress placed on the
“Social Sector Development of Gwadar Region” with statements such as the “JCC also appreciated
the progress on social sector projects.”113 Both sides were keen to ensure the success of the project,
and the inclusion of so many prominent social sector projects was important for the public image of
the CPEC in Balochistan, a marginalized province with multiple insurgent groups. As Small notes,
Chinese workers had been attacked in Gwadar before, notably in 2004 and 2007.114
In October 2019, shortly before Khan visited China, generous tax exemptions were granted to
investors in Gwadar including for income tax, sales tax, and federal exercise duties.115 Although the
Pakistani government’s concession of these exemptions met long-standing Chinese demands, they
also reflected the strategic importance of the port for the Pakistan Navy.116 It is no accident that the
decision to grant these exemptions was made by the National Development Council, which is
chaired by the prime minister but crucially includes the chief of army staff, reflecting the changed
balance of power in Pakistan.117
The granting of these exemptions stood in stark contrast to the lack of concessions over the payment
of income tax for investors in the SEZs, one of China’s concerns, as discussed above.118 Develop-
ments at the Gwadar free trade zone look more promising on paper than those of the SEZs. Recently,
the chair of the China Overseas Port Holding Company, Zhang Baozhong, has claimed that “43

Chinese companies are going to invest while 200 more firms have been registered for the pur-
pose.”119 However, it remains to be seen how much investment actually materializes from these
expressions of interest.
China also has a strategic goal at stake in the development of the Gwadar Port, and most of the
funding for projects in Gwadar “comes in the form of grants and interest free loans.”120 However, it is
striking that, in contrast to the SEZs, several of the Gwadar projects publicized in the early harvest
phase of the CPEC were designed to appease local communities in the province and in the surround-
ing area.121 These included the Pak China Friendship Hospital, the Pak-China Technical and Voca-
tional Institute, the Gwadar Livelihood Project, and the establishment of Gwadar University. Other
projects such as a desalination initiative also benefit the immediate area.
The Gwadar Livelihood Project was of particular importance as it involved the Chinese holding
company overseeing the port taking “effective measures for social sector development” and the “[u]
pgradation and development of fishing, boat making and maintenance services to protect and
promote livelihoods of [the] local population.”122 Scholar Frederic Grare, writing in 2018, suggested
that these measures were designed to appease the local population and decrease the security challeng-
es of the project. Grare wrote, “Interestingly, the Chinese authorities seemed to understand the
problem better than their Pakistani counterparts: they built a school, sent doctors and promised
some $500 million for the construction of a hospital, a college, and various infrastructure projects to
supply the city with drinking water.”123
Yet, despite the commitment of the PTI government to socioeconomic development, many of these
projects to win over local residents were removed from the 2018–2019 PSDP. In November 2019,
both the Gwadar Livelihood Project and the Development of Gwadar University were removed from
the Gwadar project pages of the CPEC website.124 Even before the removal of the Livelihood Project
from the CPEC website, local fishermen had expressed their concerns that their livelihoods were
being adversely affected by the CPEC and that the Pakistani government had not kept its develop-
ment promises to them.125 Despite a promise from Pakistani officials that “CPEC projects and
education schemes would not be dropped . . . at least four projects of [the] CPEC and one dozen
schemes of Gwadar [were] dropped from the PSDP.”126 Although conditions of austerity partly
explain the decision to drop these projects, Khan’s concern about the CPEC is also part of the
explanation. Despite being the Pakistani province with the largest territorial area, its small popula-
tion (6 percent of the country’s total) has meant that successive Pakistani governments have failed to
invest in Balochistan since it holds fewer seats in the National Assembly than any other province.127
The fishing sector represents an important part of Gwadar’s development because of its commercial
potential. The port’s fishing community has been expressing concerns about being displaced from
their traditional fishing grounds due to the construction of CPEC projects such as the Eastbay
20
Expressway for several years.128 More recently however, their entire livelihood has come under threat
as a result of developments related to the CPEC.
In October 2020, Pakistani fishermen in Sindh and Balochistan protested against the arrival of
Chinese trawlers that would fish in the exclusive economic zones of Sindh and Punjab. According to
one news account, the “president of the Gwadar Fishermen Alliance [argued that] the Chinese ships
will badly hurt local fishermen . . . Fishing in the sea is a source of livelihood for over 2.5 million
people . . . and the new trawlers will deprive us of our livelihood.”129 The locals are extremely worried
about fishing stocks being depleted. As one reporter noted, an adviser on marine fisheries for World
Wildlife Fund-Pakistan named Moazzam Khan said “Chinese fishermen are eager to fish in Paki-
stan[i] waters as they can sell the catch back home duty-free.”130
Responding to this latest wave of concerns over the future of fishing in Gwadar, the Chinese consul
general countered that China was providing assistance to local fishermen in the form of “engines,
solar panels and fishing nets . . . to help increase their fishing capacity.”131 The Chinese government
also has encouraged them to “seek [the Pakistani] federal and provincial government’s help in devel-
oping more fishing cultures to boost their future fishing capacity.”132 The latter is seen as a precondi-
tion to establish processing factories and storage plants that would enable Pakistani seafood to be
exported. The Gwadar free trade zone does include a “fishery processing centre.”133 However, while a
2013 World Bank report noted that there was an urgent need for processing facilities closer to the
sea, these latest developments suggest that the local Pakistani fishing community will not be the ones
to benefit.134
Overall, it is clear that China is keen to be seen as responsive to the local population’s concerns in
Gwadar, perhaps more so than the current PTI government. China has a clear interest in minimizing
the security challenges to the project. In this respect, Chinese actors face an uphill struggle, not least
because of the province’s long history of economic deprivation and marginalization. In addition,
whether local communities are able to benefit from a more industrialized economy is open to ques-
tion, given the low level of skills development in the province.135
Recently, progress does appear to have been made on completing the Technical and Vocational
Institute, a project that “aims to produce skilled manpower in different areas to [allow the local
population to] take maximum advantage of CPEC linked opportunities.”136 There will be concerns
from locals that Pakistanis from other provinces will take advantage of these opportunities, and, as
with the development of the free trade zone and the fishing processing center, benefits will not
necessarily accrue to the local areas around Gwadar. In addition, the tension between securing the
buy-in of local communities and the need to increase security is likely to remain, as was revealed in
December 2020 by attempts, allegedly “at the behest of ” Chinese actors according to some media
accounts, to physically fence off parts of Gwadar.137

Key Takeaways
Although there is a huge power imbalance between China and Pakistan, the way that the CPEC has
evolved over the last six years demonstrates that Pakistan has been able to shape its development.
Although China’s goal to relocate its sunset industries required fixing the frequent power outages that
plagued Pakistan in the early 2010s, it is notable that the early focus on coal power was in line with
Sharif ’s and the PML-N’s preferences for energy projects to aid their reelection campaign. Similarly,
although the Chinese wanted quick wins, the decision to focus on developing the eastern route of
the CPEC also stemmed from Pakistan’s partisan political considerations.
The use of the corridor for political gains has continued under the PTI government, with its decision
to focus on developing a particular SEZ that was less feasible than other candidates, again for parti-
san political reasons. The creation of the SEZs is a laudable aim, but their development remains
mired in bureaucratic complexity and, amid the coronavirus pandemic and other challenges, progress
has been extremely slow.
The CPEC has been sold to the Pakistani people as a way to ensure local development, job creation,
and the inclusion of all provinces. The reality is that the government has centralized power, and there
is little evidence to date of new skilled jobs being created. Although there is a lot of talk about local
employment and training opportunities in areas such as Balochistan (Pakistan’s poorest province), in
reality, the development of the area has resulted in the further alienation of local people including
(but not confined to) the local fishing community.
The most visible manifestation of centralized decisionmaking was the October 2019 establishment of
the CPEC Authority by presidential ordinance to “ensure timely completion of the CPEC projects . . .
[and] help ensure coordination among the departments concerned.”138 A senior PPP politician is
worried that the authority, led by a retired military general, will be “insulated” from the provinces
and that it “will be more an affair between the Authority and the [prime minister].”139
The CPEC Authority Act, passed by the National Assembly in February 2021, but which is still waiting
to be passed in the upper house, provides that the CPEC Authority “shall report to the Prime Minister”
and “shall be responsible for planning, facilitating, coordinating, enforcing, monitoring, and evaluation
the smooth implementation of all activities related to [the CPEC].”140 The bill also provides that the
CPEC Authority will be able to organize meetings of the JCC and the joint working groups and is
responsible for “inter-provincial and inter-ministerial coordination” on the CPEC. From the bill’s word-
ing, the JCC will still be co-chaired by the minister for planning on the Pakistani side, but the CPEC
Authority will “interface [directly] with [the] National Development and Reform Commission . . . of
China after due deliberations and consultations with relevant ministries. . . .”141
22
This centralization has pleased China.142 But Beijing has still sought to increase “effective oversight
and monitoring” by proposing a new Pakistan-China joint parliamentary committee on the CPEC.
This body will not replace the JCC but reportedly will be responsible for “day-to-day monitoring of
[the] CPEC.”143
Lessons Learned
An examination of the key local forces that have shaped Pakistani agency and decisionmaking on the
CPEC offers important lessons for how the CPEC’s projects have unfolded to date and for interac-
tions between Chinese actors and other BRI recipient countries.
Lessons for Pakistan

Increase transparency. BRI projects are known for their lack of transparency, and the CPEC is no
exception. As the International Crisis Group noted back in 2018, “Analysis of the economic promise
and impact of the CPEC . . . is hampered by the opacity of its formulation and rollout.”144 This
remains true in 2021. Legitimate academic inquiries on the progress of CPEC projects are often met
by political, military, and bureaucratic actors with charges of promoting conspiracy theories.145 The
CPEC has the potential to increase economic development and improve infrastructure in Pakistan,
but the secrecy surrounding many of the projects means that it is very difficult to make informed
recommendations about them.
Widen consultations. To maximize the gains from these investments, it is important for national
and provincial priorities to be informed by a wider consultative process. Too often, decisions on the
CPEC have been made in secret, only to be contested by those left out of the process. The lack of
wider consultations also results in decisions that do not benefit the country as a whole. For example,
so far there have been no special incentives for specific industries that would benefit Pakistan, nor
have there been incentives tied to local employment quotas or training provisions.
Get local buy-in. There is a need to rally support for BRI projects from a range of stakeholders,
including governments (federal and provincial), businesses, and local communities. In the case of the
CPEC, this is especially important in Balochistan, where long-standing grievances exist, but winning
over locals is also important in the other provinces of Pakistan.146 Although such consultations may
slow down project implementation, doing so is likely to result in decisions that are more readily
accepted by local communities. The head of the CPEC authority very publicly consulted chief
ministers when he was appointed, but such consultations need to be ongoing and must go beyond
such public gestures.

Lessons for All BRI Recipients
Identify a clear set of national and provincial priorities. It is undeniable that countries can gain
from BRI investments. Pakistan, despite its weak international position and weak economy has had
agency in its dealings with China, even though Pakistan is not a high foreign policy priority for
Beijing.147 Pakistan’s experience illustrates the importance of identifying a clear set of priorities when
countries deal with Beijing and for them to use the leverage they have. The experience of Pakistan
demonstrates that, despite a slow start, it is possible to secure domestic political benefits from BRI
investments (although that should not be taken to minimize the dangers of a potential debt trap.)
Pakistan’s experience also illustrates that there are areas where it is more difficult for BRI recipients to
negotiate, such as on the terms agreed with the independent power producers, given Pakistan’s weak
FDI position.
Consider projects’ financial and social sustainability. Recipient countries need to build in mecha-
nisms to ensure that technology transfers and training are integral to the development of BRI proj-
ects. Otherwise, these important issues may end up on the backburner. Many CPEC projects include
the construction of training facilities in Pakistan, but the timelines for the construction of these
facilities have all too often fallen behind schedule.
24
About the Authors
Katharine Adeney is a professor of politics and the director of the University of Nottingham’s Asia
Research Institute in the UK. Her research interests include elections and democracy in South Asia,
ethnic conflict regulation, and the politics of federal states. She was lead consultant for the Forum of
Federations programme in Pakistan. She is the author of Federalism and Ethnic Conflict Regulation in
India and Pakistan and her research on Pakistan has been published in Democratization, the Brown
Journal of World Affairs, Asian Survey, Representation, Publius, Commonwealth and Comparative
Politics, and Ethnopolitics.
Filippo Boni is a lecturer in politics and international studies at The Open University in the UK and
a research fellow in the European Research Council–funded project REDEFINE, looking at China’s
rise and its implications for global development. He is interested in the politics of Chinese invest-
ments in South Asia and Europe, as well as in the international relations of South Asia, particularly
in bilateral ties between Pakistan and China and the Belt and Road Initiative. He is the author
of Sino-Pakistani Relations: Politics, Military and Regional Dynamics, and his research has been pub-
lished in Asian Survey, Commonwealth and Comparative Politics, and Asia Policy, among others.
Acknowledgments
The authors would like to thank Evan Feigenbaum, Nonna Gorilovskaya, Liming Lin, and Ryan
DeVries for their feedback on earlier drafts and for their editorial assistance. They would especially
like to thank the many people in Pakistan who, over the course of the past six years, shared their time
to talk about the dynamics discussed in the paper. One of the authors (Katharine Adeney) would also
like to thank Maryam Gilani, Muhammad Shakeel Ahmad, and Qaiser Nawab for facilitating access
for interviews in Lahore and Islamabad; Lahore University of Management Sciences for hosting her;
and an international collaboration grant from the British Council and HEC Pakistan for funding her
research visit in February–March 2020.

Notes
1 Madiha Afzal, “At All Costs: How Pakistan and China Control the Narrative on the China-Pakistan
Economic Corridor,” Brookings Institution, June 2020, https://www.brookings.edu/research/at-all-costs-
how-pakistan-and-china-control-the-narrative-on-the-china-pakistan-economic-corridor.
2 The Belt and Road Initiative comprises a series of road and maritime linkages to facilitate trade between
China and the world, especially Europe, Southeast Asia, South Asia, and Africa.
3 Yi Wang, “An Ironclad Friendship Growing Stronger in the New Era,” Express Tribune, March 2, 2021,
https://tribune.com.pk/story/2286953/an-ironclad-friendship-growing-stronger-in-the-new-era.
4 “China, Russia Stress Non-interference in Countries’ Internal Affairs,” Xinhua New Agency, February 4
2021, http://www.xinhuanet.com/english/2021-02/04/c_139721958.htm.
5 Sherry Rehman, “The First Interim Report (July 2018-June 2019)” Pakistani Senate Special Committee
on the Project of China-Pakistan Economic Corridor, 2019, http://senate.gov.pk/uploads/documents/
1567600264_202.pdf.
6 This analysis has been informed by in-person interviews conducted in Pakistan between 2015 and 2020,
including remote follow-up interviews in December 2020 and January 2021. The fact that the interviews
have been conducted over the past six years has enabled the authors to process trace the evolution of the
various projects within the CPEC framework. The interview material has been triangulated with other
key primary sources, such as the minutes from JCC meetings and the PSDP allocations to corroborate
the claims made in this paper.
7 Pakistani Ministry of Planning, Development and Reform and China’s National Development and
Reform Commission, “Long Term Plan for China-Pakistan Economic Corridor (2017-2030),”
November 21, 2017, http://www.cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf.
8 See article 5 in the following Pakistani law. “The Special Economic Zones Act, 2012: Act No. XX of
2012: An Act to Provide for Setting Up and Operation of Special Economic Zones in Pakistan. Act No.
XX of 2012, as amended up to 24th October 2016,” Pakistani National Assembly, October 24, 2016,
https://www.ilo.org/dyn/natlex/docs/ELECTRONIC/92177/128186/F646770790/PAK92177%202016
.pdf.
9 Author interview with Aman Ullah, joint chief economist at the Planning and Development Board
(Lahore), February 2020.
10 Arif Rafiq, “CPEC: A Paucity of Planning by Pakistan,” Global Village Space, April 12, 2018,
https://www.globalvillagespace.com/cpec-a-paucity-of-planning-by-pakistan/.
11 Ibid.
12 “Game Changer: All Provinces Will Reap Benefits of CPEC, Says PM,” Express Tribune, January 11,
2016, https://tribune.com.pk/story/1026007/game-changer-all-provinces-will-reap-benefits-of-cpec-
says-pm.
13 Filippo Boni and Katharine Adeney, “The Impact of the China-Pakistan Economic Corridor on
Pakistan’s Federal System: The Politics of the CPEC,” Asian Survey 60, no.3 (June 2020): 441–465,
https://doi.org/10.1525/as.2020.60.3.441.
14 “Composition,” National Assembly of Pakistan, http://www.na.gov.pk/en/composition.php.
15 Author interview with a bureaucrat in the Planning and Development Commission, Islamabad,
February 2015.
16 It is unclear at the time of writing where Pakistan’s new CPEC Authority or the new Pakistan-China
joint parliamentary panel will formally sit within this framework. See “Institutional Framework of
CPEC,” Pakistani Ministry of Planning, Development, and Special Initiatives, http://www.cpec.gov.pk/
institutional-framework/5.
26
17 Governments of Pakistan and China, “Minutes of the 2nd Joint Cooperation Committee Meeting on
China-Pakistan Economic Corridor Planning. Held on 19th February 2014 in Beijing China,” in CPEC:
A New Political, Economic and Strategic Game, Saleem Safi (ed.) (Lahore: Sagar Publishers, 2014), 59.
18 Ibid, 59.
19 Pakistan Muslim League (Nawaz), “National Agenda for Real Change: Manifesto 2013,”
https://pmo.gov.pk/documents/manifesto.pdf, 22.
20 Author interview with Aman Ullah, joint chief economist at the Planning and Development Board
(Lahore), February 2020. In addition, under the PPP government (indeed, even during Musharraf ’s era)
Pakistan had courted China to establish an energy corridor through the country in light of the country’s
strategic geographical position as a bridge for the oil supplies from the Arabian Peninsula to reach
western China through the shortest available route.
21 Governments of Pakistan and China, “Minutes of the Joint Cooperation Committee Established Under
the Memorandum of Understanding on the Cooperation of Developing ‘China-Pakistan Economic
Corridor’ Long Term Plan and Action Plan Between National Development and Reform Commission
of the People’s Republic of China and Ministry of Planning, Development and Reforms of the Islamic
Republic of Pakistan. Held on 27th August 2013 at Islamabad-Pakistan,” in Safi, CPEC: A New Political,
Economic and Strategic Game, 38.
22 Ibid, 34
23 Ibid, 34.
24 The data in table 1 was compiled by the authors based on CPEC’s official website and the following news
sources. See “CPEC Energy Priority Projects,” Pakistani Ministry of Planning, Development, and Special
Initiatives, accessed April 20, 2021, http://cpec.gov.pk/energy; “Hubco’s Thar Energy Reaches Financial
Close on $497 Million Coal-Fired Power Project,” News, January 31, 2020, https://www.thenews.com
.pk/print/606475-hubco-s-thar-energy-reaches-financial-close-on-497-million-coal-fired-power-project;
and “Hubco’s TNPTL to Commence Commercial Operations in 2022,” Business Recorder, October 1,
2020, https://www.brecorder.com/news/40022869.
25 “CCI Approves National Power Policy 2013,” Dawn, July 31, 2013, https://www.dawn.com/
news/1033228.
26 Pakistani Ministry of Planning, Development and Special Initiatives, “CPEC-Energy Priority Projects,”
accessed April 29, 2021, http://cpec.gov.pk/energy.
27 Erica Downs, “China-Pakistan Economic Corridor Power Projects: Insights Into Environmental and
Debt Sustainability,” Columbia University School of International and Public Policy’s Center on Global
Energy Policy, October 3, 2019, https://www.energypolicy.columbia.edu/research/report/china-pakistan-
economic-corridor-power-projects-insights-environmental-and-debt-sustainability. The other 49 percent
is owned by the Qatari investment firm Al Mirqab Capital. Also see “China, Qatar to Build $2.09b
Coal-Fired Power Plant at Karachi,” Nation, April 11, 2015, https://nation.com.pk/11-Apr-2015/china-
qatar-to-build-2-09b-coal-fired-power-plant-at-karachi.
28 “2×660MW Coal-Fired Power Plants at Port Qasim Karachi: China-Pakistan Economic Corridor
(CPEC) Official Website,” Pakistani Ministry of Planning Development & Special Initiatives, accessed
May 14, 2021, http://cpec.gov.pk/project-details/1.
29 Daniel Markey, China’s Western Horizon: Beijing and the New Geopolitics of Eurasia (Oxford: Oxford
University Press, 2020).
30 Susannah Price, “China Backs Pakistan Military,” BBC News, May 12, 2001, http://news.bbc.co.uk/1/
hi/world/south_asia/1327518.stm.
31 Author interview with a senior politician, Islamabad, February 2015.

32 Michael Wines, “Pakistan and China: Two Friends Hit a Bump,” New York Times, May 26, 2011, https://
www.nytimes.com/2011/05/27/world/asia/27beijing.html.
33 Ibid.
34 Ibid.
35 James R. Holmes, “Gwadar and the ‘String of Pearls,’” Diplomat, February 9, 2013, https://thediplomat.
com/2013/02/gwadar-and-the-string-of-pearls/. For more on Pakistan’s policy continuity vis-à-vis China,
see Filippo Boni “Civil-Military Relations in Pakistan: A Case Study of Sino-Pakistani Relations and the
Port of Gwadar,” Commonwealth and Comparative Politics 54, no. 4 (2016): 498–517.
36 Governments of Pakistan and China, “Minutes of the Joint Cooperation Committee Established Under
the Memorandum of Understanding on the Cooperation of Developing “China-Pakistan Economic
Corridor” Long Term Plan and Action Plan Between National Development and Reform Commission
of the People’s Republic of China and Ministry of Planning, Development and Reforms of the Islamic
Republic of Pakistan. Held on 27th August 2013 at Islamabad-Pakistan,” in Safi, CPEC: A New Political,
Economic and Strategic Game, 42.
37 Ibid.
38 Governments of Pakistan and China, “Minutes of the 3rd Joint Cooperation Committee Meeting on
China-Pakistan Economic Corridor held on 27 August, 2014 in Beijing China,” in Safi, CPEC: A New
Political, Economic and Strategic Game, 69.
39 The Fiber Optic Cable Project provides “secure connections” between Pakistan and China and pro-
vides alternative internet traffic routes, decreasing the extent of internet traffic to Pakistan that is routed
through India. Mifrah Haq, “China Builds Digital Silk Road in Pakistan to Africa and Europe,” Nikkei
Asia, January 29, 2021, https://asia.nikkei.com/Spotlight/Belt-and-Road/China-builds-Digital-Silk-
Road-in-Pakistan-to-Africa-and-Europe. For more on the Digital Silk Road in Pakistan, see Filippo
Boni, “Protecting the Belt and Road Initiative: China’s Cooperation With Pakistan to Secure CPEC,”
Asia Policy 26, no. 2 (2019): 5–12.
40 Boni and Adeney, “The Impact of the China-Pakistan Economic Corridor.”
41 Isaac B. Kardon, Conor M. Kennedy, and Peter A. Dutton, “Gwadar: China’s Potential Strategic Strong-
point in Pakistan,” China Maritime Studies Institute China Maritime Report #7, August 2020, https://
www.andrewerickson.com/2020/08/cmsi-china-maritime-report-7-gwadar-chinas-potential-strategic-
strongpoint-in-pakistan.
42 Filippo Boni, Sino-Pakistani Relations: Politics, Military and Regional Dynamics (Abingdon: Routledge,
2019).
43 Andrew Small, The China-Pakistan Axis (New York: Oxford University Press, 2015).
44 Katharine Adeney, “Panama Verdict: Corruption and Politics in Pakistan,” Asia Dialogue, July 28, 2017,
https://theasiadialogue.com/2017/07/28/corruption-and-politics-in-pakistan/.
45 “China Ready to Continue Working Jointly on CPEC Despite PM’s Disqualification,” Dawn, July 29,
2017, https://www.dawn.com/news/1348227.
46 Andrew Small, “Buyer’s Remorse: Pakistan’s Elections and the Precarious Future of the China-Pakistan
Economic Corridor,” War on the Rocks, July 27, 2018, https://warontherocks.com/2018/07/buyers-
remorse-pakistans-elections-and-the-precarious-future-of-the-china-pakistan-economic-corridor/; and
Lan Jiang, “Ouster of Nawaz Sharif Adds Variables to Economic Corridor Plan,” Global Times, August 3,
2017, https://www.globaltimes.cn/content/1059537.shtml.
47 “Eastern Route for CPEC May Foster Enmity Between Provinces, Warns Imran,” Express Tribune,
September 30, 2015, https://tribune.com.pk/story/965041/eastern-route-for-cpec-may-foster-enmity-
between-provinces-warns-imran; and Mansoor Malik, “Imran Blasts Nawaz for ‘Corruption,’ ‘Inefficien-
cy,’” Dawn, October 9, 2015, https://www.dawn.com/news/1211893/imran-blasts-nawaz-for-corruption-
inefficiency
28
48 “Imran Khan’s Speech in Full,” Al Jazeera, July 26, 2018, https://www.aljazeera.com/news/2018/7/26/
imran-khans-speech-in-full.
49 Andrew Small, “Returning to the Shadows: China, Pakistan, and the Fate of CPEC,” German
Marshall Fund, September 23, 2020, https://www.gmfus.org/publications/returning-shadows-china-
pakistan-and-fate-cpec.
50 “Ambassador Yao Jing Calls on Imran Khan, Chairman of the Pakistan Tehreek-e-Insaf,” Chinese
Ministry of Foreign Affairs, July 20, 2018, https://www.fmprc.gov.cn/mfa_eng/wjb_663304/
zwjg_665342/zwbd_665378/t1583482.shtml.
51 Ibid.; “Ambassador Yao Jing Met With Adviser to PM on Commerce and Investment,” Chinese
Ministry of Foreign Affairs, August 30, 2018; http://pk.chineseembassy.org/eng/zbgx/t1612580.htm; and
“Ambassador Yao Jing Met with Minister of Railways,” Chinese Ministry of Foreign Affairs, August 31,
2018, http://pk.chineseembassy.org/eng/zbgx/t1612586.htm.
52 Author interview with Andrew Small by email, May 2021.
53 Jamil Anderlini, Henny Sender, and Farhan Bokhari, “Pakistan Rethinks Its Role in Xi’s Belt and Road
Plan,” Financial Times, September 9, 2018, https://www.ft.com/content/d4a3e7f8-b282-11e8-99ca-
68cf89602132.
54 Ibid.
55 Author interview with retired army officer by email, October 2020; “PM Imran Renews Commitment
to CPEC,” Express Tribune, September 10, 2018, https://tribune.com.pk/story/1799438/pm-imran-
renews-commitment-cpec; and Khaleeq Kiani, “Move to Cut Development Funds by Over Rs250bn,”
Dawn, September 8, 2018, https://www.dawn.com/news/1431636.
56 “Xi Meets Pakistani Army Chief,” Xinhua News Agency, September 20, 2018, http://www.xinhuanet
.com/english/2018-09/20/c_137479890.htm.
57 Author interview with a senior bureaucrat, Islamabad, March 2020.
58 Shahbaz Rana, “Austerity Axe Falls on CPEC, Gwadar Projects,” Express Tribune, September 26, 2018,
https://tribune.com.pk/story/1811585/1-austerity-axe-falls-cpec-gwadar-projects.
59 Author’s interview with a senior bureaucrat, Islamabad, March 2020.
60 Authors’ calculations from information given in Rana, “Austerity Axe Falls on CPEC, Gwadar Projects.”
61 Rana, “Austerity Axe Falls on CPEC, Gwadar Projects,”; Pakistani Ministry of Planning, Development
and Special Initiatives, “CPEC & Related Projects Under Public Sector Development Program (PSDP)
2017-2018,” http://cpec.gov.pk/cpec-psdp-funded-projects; and Pakistani Ministry of Planning, Devel-
opment and Special Initiatives, “CPEC & Related Projects Under Public Sector Development Program
(PSDP) 2018-2019,” http://cpec.gov.pk/cpec-psdp-funded-projects.
62 Jing Yao, “Public Talk || Chinese Ambassador H.E Mr. Yao Jing || CPEC || ISSI,” YouTube, posted by
BRI TV, February 22, 2020, https://www.youtube.com/watch?v=BMjepMoZaPc&t=335s.
63 “Special Economic Zones: An Operational Review of Their Impacts,” World Bank Group, 2017,
https://openknowledge.worldbank.org/handle/10986/29054.
64 Pakistani Ministry of Planning, Development and Reform and China’s National Development and Re-
form Commission, “Long Term Plan for China-Pakistan Economic Corridor (2017-2030),” November
21, 2017, http://cpec.gov.pk/long-term-plan-cpec.
65 See special section 1 on the CPEC in the following report by the Pakistani central bank. State Bank of
Pakistan, “The State of Pakistan’s Economy: First Quarterly Report 2017–2018,” 2018, 83, https://www
.sbp.org.pk/reports/quarterly/fy18/First/qtr-index-eng.htm.
66 This scheme gives Pakistan very generous tariff reductions, some as low as 0 percent, on its imports into
the regional bloc. See “China-Pakistan Economic Corridor: Opportunities and Risks,” International
Crisis Group, June 29, 2018, https://www.crisisgroup.org/asia/south-asia/pakistan/297-china-pakistan-
economic-corridor-opportunities-and-risks.

67 Author interview with Steve Tsang, director of SOAS University of London’s China Centre, January
2021; and Shahbaz Rana, “Due to Delay, Centre Plans to Take Over Development of Economic Zones,”
Express Tribune, January 14, 2018, https://tribune.com.pk/story/1608216/2-due-delay-centre-plans-take-
development-economic-zones.
68 These nine SEZs include the Moqpondass SEZ in Gilgit-Baltistan, the Mirpur Industrial Zone in Azad
Jammu and Kashmir, the ICT Model Industrial Zone in Islamabad, the Punjab- China Economic Zone
in Punjab’s M-2 District Sheikhupura, the Rashakai Economic Zone on M-1 (Khyber-Pakhtunkhwa),
Mohmand Marble City in the Federally Administered Tribal Areas, the Bostan Industrial Zone in Ba-
lochistan, the Dhabeji Special Economic Zone in Sindh, and the Port Qasim Special Economic Zone in
Sindh. Governments of Pakistan and China, “Minutes of the 6th Joint Cooperation Committee Meeting
on China-Pakistan Economic Corridor held on 29th December, 2016 in Beijing China,” in Safi, CPEC:
A New Political, Economic and Strategic Game, 99–100.
69 In 2012, there were three SEZs located in Punjab, three in Sindh, and one in Khyber Pakhtunkhwa.
70 “Govt Proposes 29 Industrial Parks, 21 Mineral Zones Under CPEC,” News International, July 26, 2015,
https://www.thenews.com.pk/print/13780-govt-proposes-29-industrial-parks-21-mineral-zones-under-
cpec.
71 Governments of Pakistan and China, “Minutes of the 6th Joint Cooperation Committee Meeting,” in
Safi, CPEC: A New Political, Economic and Strategic Game, 99.
72 Ibid., 101
73 Governments of Pakistan and China, “Minutes of the 7th Joint Cooperation Committee Meeting on
China-Pakistan Economic Corridor 21st November, 2017 in Islamabad, Pakistan,” in Safi, CPEC: A
New Political, Economic and Strategic Game. The chief minister of Punjab was particularly keen on the
Sheikhupura site as it was closer to Lahore. This insight is based on author interviews with journalist
Hasaan Khawar and a Punjab economic bureaucrat, December 2020.
74 Industrial estates are often located within SEZs but only SEZs qualify for the designated “special incen-
tives and regulations that create a more liberal and efficient business environment.” See Hasaan Khawar,
“SEZs and Industrial Estates in CPEC,” Express Tribune, December 5, 2017, https://tribune.com.pk/
story/1575857/sezs-industrial-estates-cpec.
75 Pakistan Tehreek-e-Insaf, “The Road to Naya Pakistan: PTI Manifesto 2018,” 2018, 27, https://www.
pmo.gov.pk/documents/manifesto-pti.pdf.
76 “Pakistan Offers Attractive Environment With Complete Incentivization for Industrial Relocation,”
Pakistani Board of Investment, September 16, 2020, https://invest.gov.pk/node/1236.
77 Author interview with Raoof Hasan, Islamabad, March 2020.
78 Saleem Safi, “Latest Progress on the CPEC,” in Safi, CPEC: A New Political, Economic and Strategic
Game, 126; and Khaleeq Kiani, “Joint Committee on CPEC to Ink Industrial Framework Agreement
on Dec 20,” Dawn, May 6, 2020, https://www.dawn.com/news/1450137/joint-committee-on-cpec-to-
ink-industrial-framework-agreement-on-dec-20?fromNewsdog=1&utm_source=NewsDog&utm_
medium=referral.
79 The authors would like to thank Khalid Jarral for discussing this issue with them. See also Ejaz Hussain
and Muhammad Furqan Rao, “China–Pakistan Economic Cooperation: The Case of Special Economic
Zones (SEZs),” Fudan Journal of the Humanities and Social Sciences 13, no. 4 (2020): 458; and Gov-
ernments of Pakistan and China, “Minutes of the 7th Joint Cooperation Committee Meeting,” in Safi,
CPEC: A New Political, Economic and Strategic Game, 119.
80 Small, “Returning to the Shadows,” 45.
81 Although Khan has been a strong advocate of the Rashakai SEZ, it is interesting to note that this was a
priority area under the PML-N government too—although not one that was then led by Nawaz Sharif.
30
Author interview, senior Pakistani journalist, January 2021.
82 Safi, CPEC: A New Political, Economic and Strategic Game, 99–100. In addition, the latest was informa-
tion taken from the following Pakistani government website. “CPEC Special Economic Zones (SEZs),”
Pakistani Ministry of Planning, Development and Special Initiatives, last accessed May 6, 2021, http://
cpec.gov.pk/special-economic-zones-projects. Additional information was gleaned from the following
news article. Usman Hanif, “Sindh Govt Calls for Dhabeji SEZ Re-Bidding” Express Tribune, December
16, 2020, https://tribune.com.pk/story/2276113/sindh-govt-calls-for-dhabeji-sez-re-bidding
83 Author email interview with a Punjab economic bureaucrat, December 2020.
84 Shahbaz Rana, “Delay: SEZs Unlikely to Be Ready for Investment for Two More Years,” Express Tribune,
January 19, 2019, https://tribune.com.pk/story/1891623/2-delay-sezs-unlikely-ready-investment-two-
years.
85 “Expression of Interest,” Punjab Procurement Regulatory Authority, accessed April 7, 2021, http://eproc
.punjab.gov.pk/Tenders/EOI.pdf; and “Faisalabad SEZ to Create 70,000 New Jobs in One Year,” Nation,
January 18, 2020, https://nation.com.pk/18-Jan-2020/faisalabad-sez-to-create-70-000-new-jobs-in-one-
year.
86 Shahid Rashid, Muhammad Zia Muzammil, and Shujaa Waqar, “Employment Outlook of China Paki-
stan Economic Corridor: A Meta Analysis,” CPEC Centre for Excellence, 2018, https://cpec-centre.pk/
employment-outlook-of-china-pakistan-economic-corridor-a-meta-analysis.
87 “Chinese Diplomat Says China Ready to Help Gwadar’s Fishing Industry Grow,” Pakistan Today,
December 28, 2020, https://profit.pakistantoday.com.pk/2020/12/28/chinese-diplomat-says-china-
ready-to-help-gwadars-fishing-industry-grow.
88 Zahra Beg, “Rhetoric Vs. Reality: SEZs Under the China-Pakistan Economic Corridor (CPEC),”
European Institute of Asian Studies, March 6, 2020, https://www.eias.org/news/rhetoric-vs-reality-
sezs-under-the-china-pakistan-economic-corridor-cpec.
89 Author interview with Hasaan Khawar by email, December 2020.
90 Author interview with a senior political appointee, Lahore, February 2020.
91 “A Leading Chinese Company to Provide Jobs to Locals in Pakistan,” CPEC Portal, September 4, 2020,
http://cpecinfo.com/a-leading-chinese-company-to-provide-jobs-to-locals-in-pakistan.
92 Boni and Adeney, “The Impact of the China-Pakistan Economic Corridor,” 451
93 See article 8 of the Special Economic Zones Act, 2012. Pakistani National Assembly, “The Special
Economic Zones Act, 2012: Act No. XX of 2012: An Act to Provide for Setting Up and Operation of
Special Economic Zones in Pakistan. Act No. XX of 2012, as amended up to 24th October 2016.”
94 Interviewee quoted in Saira Naeem, Abdul Waheed, and Muhammed Naeem Khan, “Drivers and
Barriers for Successful Special Economic Zones (SEZs): Case of SEZs Under China Pakistan Economic
Corridor,” Sustainability 12, no. 11 (2020), 10.
95 “CPEC Authority Chairman Welcomes Setting up of Health City in Faisalabad SEZ,” Express Tribune,
September 28, 2020, https://tribune.com.pk/story/2265952/cpec-authority-chairman-welcomes-setting-
up-of-health-city-in-faisalabad-sez.; and “Three New Special Economic Zones Approved,” Dawn,
October 8, 2020, https://www.dawn.com/news/1583883.
96 “Adviser Finds SEZ Framework Antithesis to Industrialisation,” News International, May 28, 2020,
https://www.thenews.com.pk/print/664003-adviser-finds-sez-framework-antithesis-to-industrialisation.
In the same interview, he reportedly “said the proposed amendments aim to cater [to] . . . the govern-
ment’s vision to promote services sector, such as knowledge and information technology, and integrated
tourism”—a move away from the CPEC’s previously stated priorities.

97 Adnan Aamir, “China Moves for More Control Over Belt and Road in Pakistan,” Nikkei Asia, February
11, 2021, https://asia.nikkei.com/Spotlight/Belt-and-Road/China-moves-for-more-control-over-Belt-
and-Road-in-Pakistan.
98 “PM Khan Inaugurates Allama Iqbal ‘Industrial City’ Under CPEC,” Nation, January 3, 2020, https://
nation.com.pk/03-Jan-2020/pakistan-establishes-allama-iqbal-industrial-city; and “PM Vows Indus-
trialisation as Next Step Under CPEC,” Express Tribune, September 14, 2020, https://tribune.com.pk/
story/2263947/pm-vows-industrialisation-as-next-step-under-cpec.
99 Pakistani Board of Investment, @investinpak, Twitter post, Oct. 8, 2020, 2:22 a.m., https://twitter.com/
investinpak/status/1314088787039973378?s=20.
100 Nasir Jamal, “CPEC in Renewed Focus,” Dawn, November 12, 2019, https://www.dawn.com/
news/1516005/cpec-in-renewed-focus.
101 Author interview with Sher Ali Arbab, chair of the Parliamentary Committee on CPEC, Islamabad,
March 2020.
102 Author interview by email with Punjab economic bureaucrat, December 2020.
103 Afshan Subohi, “CPEC: The Ball Is in Pakistan’s Court,” Dawn, February 10, 2020, https://www.dawn.
com/news/1533449; and Jamal, “CPEC in Renewed Focus.”
104 Jamal, “CPEC in Renewed Focus.”
105 Subohi, “CPEC: The Ball Is in Pakistan’s Court.”
106 Author interview with Western diplomat, Islamabad, March 2020.
107 Subohi, “CPEC: The Ball Is in Pakistan’s Court.”
108 Imran Ali Kundi and Fawad Yousafzai, “Construction of First Steel Unit at Rashakai SEZ Under Way,”
Nation, March 27, 2021, https://nation.com.pk/27-Mar-2021/construction-of-first-steel-unit-at-rashakai-
sez-under-way.
109 Hussain and Rao, “China-Pakistan Economic Cooperation,” 467–468.
110 Amin Ahmed, “Free Trade Zone in Gwadar,” Dawn, February 2, 2015, https://www.dawn.com/
news/1160849.
111 Yan Li, “Groundwork Laid for China-Pakistan FTZ,” Chinanews.com, November 17, 2015, http://
www.ecns.cn/business/2015/11-17/188916.shtml.
112 Iftikhar A. Khan, “China to Get 91pc Gwadar Income, Minister Tells Senate,” Dawn, November 25,
113 Governments of Pakistan and China, “Minutes of the 6th Joint Cooperation Committee Meeting,” in
Safi, CPEC: A New Political, Economic and Strategic Game, 94, 96.
114 Small, The China Pakistan Axis, Revised Indian edition, (Gurgaon: Random House India, 2015), 102.
115 Shahbaz Rana, “Pakistan Approves Tax Relief for Gwadar Port, Free Zone,” Express Tribune, October 6,
2019, https://tribune.com.pk/story/2073068/pakistan-approves-tax-relief-gwadar-port-free-zone.
116 Small, The China Pakistan Axis, 105.
117 Previous tax exemptions had been agreed to in 2016, but the 2019 exemptions were more generous.
118 Rana, “Pakistan Approves Tax Relief for Gwadar Port, Free Zone.”
119 Amiri Khan, “43 Chinese Firms All Set to Invest in Gwadar SEZ: COPHC,” Express Tribune, February
17, 2021, https://tribune.com.pk/story/2284513/43-chinese-firms-all-set-to-invest-in-gwadar-sez-cophc.
120 Hao Zhou, “China to Run Pakistani Port,” Global Times, February 1, 2013, https://www.globaltimes.cn/
content/759538.shtml; Small, The China Pakistan Axis, 105; and Boni and Adeney, “The Impact of the
China-Pakistan Economic Corridor on Pakistan’s Federal System.”
121 “CPEC Gwader Projects,” Pakistani Ministry of Planning, Development & Special Initiatives, accessed
2021, http://cpec.gov.pk/gwader.
32
122 “Gwadar Livelihood Project,” Pakistani Ministry of Planning, Development & Special Initiatives,
accessed 2021, http://cpec.gov.pk/project-details/66.
123 Frederic Grare, “Along the Road: Gwadar and China’s Power Projection,” European Union Institute for
Security Studies, July 2018, http://www.iss.europa.eu/sites/default/files/EUISSFiles/Brief%207%20
Gwadar_0.pdf.
124 “CPEC Gwader Projects,” Pakistani Ministry of Planning, Development & Special Initiatives, accessed
2021. Direct links to the pages still work, but the projects no longer appear under the list at cpec.gov.pk/
gwadar.
125 Zofeen T. Ebrahim, “What’s Happening at Pakistan’s Gwadar Port?” China Dialogue, June 16, 2020,
https://chinadialogue.net/en/business/9869-what-s-happening-at-pakistan-s-gwadar-port.
126 Rana, “Austerity Axe Falls on CPEC, Gwadar Projects.”
127 “Table – 1 Area, Population by Sex, Sex Ratio, Population Density, Urban Proportion, Household Size
and Annual Growth Rate,” Pakistan Bureau of Statistics, 2017, https://www.pbs.gov.pk/sites/default/
files//population_census/National.pdf.
128 Ismail Sasoli, “Gwadar Fishermen Protest Against Construction of CPEC’s Project Enters 12th Day,”
Dawn, December 29, 2018, https://www.dawn.com/news/1454126.
129 Adnan Aamir, “Pakistanis to Protest Arrival of Chinese Fishing Vessels,” Nikkei Asia, September 1, 2020,
https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistanis-to-protest-arrival-of-Chinese-fishing-vessels.
130 Muhammad Akbar Notezai and Atika Rehman, “Gwadar Fishers Fearful as China Eyes Pakistan’s
Fisheries,” Third Pole, February 11, 2021, https://www.thethirdpole.net/en/livelihoods/gwadar-fishers-
fearful-as-china-eyes-pakistans-fisheries.
131 Ibid.
132 “Chinese Diplomat Says China Ready to Help Gwadar’s Fishing Industry Grow,” Pakistan Today,
December 28, 2020, https://profit.pakistantoday.com.pk/2020/12/28/chinese-diplomat-says-china-
ready-to-help-gwadars-fishing-industry-grow.
133 “Development of Gwadar Free Zone: Special Report on CPEC Projects (Transportation Infrastructure:
Part 4),” Chinese Embassy in Pakistan, October 1, 2018, http://pk.chineseembassy.org/eng/zbgx/CPEC/
t1627112.htm.
134 Ahmad Ahmadani, “Govt Asked to Recover Rs100bn From ‘Corrupt’ IPPs,” PT Profit, April 11, 2020,
https://profit.pakistantoday.com.pk/2020/04/11/govt-asked-to-recover-rs100bn-from-corrupt-ipps; and
“Islamic Republic of Pakistan - Balochistan Needs Assessment: Development Issues and Prospects (Vol.
4) Fisheries,” World Bank, 2013, https://documents.worldbank.org/en/publication/documents-reports/
documentdetail/950791468286789595/fisheries.
135 Author interview with a central government bureaucrat, Islamabad, March 2020.
136 “Pak-China Technical and Vocational Institute in Gwadar to Be Completed Next Year,” CPECinfo.com,
February 7, 2020, http://cpecinfo.com/pak-china-technical-and-vocational-institute-in-gwadar-to-
be-completed-next-year; and “Pak-China Technical and Vocational Institute Shows Progress,” News,
October 25, 2020, https://www.thenews.com.pk/print/734495-pak-china-technical-and-vocational-
institute-shows-progress.
137 Khurram Husain, “What’s Up in Gwadar?,” Dawn, December 31, 2020, https://www.dawn.com/
news/1598832.
138 Aamir Yasin, “Asim Bajwa Made Chairman of Newly Created CPEC Authority,” Dawn, November 27,
139 Author interview with Raza Rabbani, Islamabad, March 2020.
140 See article 3 in the relevant bill. “China Pakistan Economic Corridor Authority Bill,” Pakistani National
Assembly, February 1, 2021, http://www.na.gov.pk/uploads/documents/1612267873_350.pdf

141 See article 4 in the bill. Pakistani National Assembly, “China Pakistan Economic Corridor Authority
Bill.”
142 “Chinese Envoy Impressed With CPEC’s Authority’s Performance,” Express Tribune, November 28,
2020, https://tribune.com.pk/story/2273806/chinese-envoy-impressed-with-cpec-authoritys-
performance.
143 Aamir, “China Moves for More Control Over Belt and Road in Pakistan”; and “Pakistan-China Joint
Parliamentary Panel Soon to Oversee CPEC,” Dawn, January 28, 2021, https://www.dawn.com/
news/1604032.
144 International Crisis Group, “China-Pakistan Economic Corridor: Opportunities and Risks.”
145 Multiple author interviews in Islamabad, March 2020.
146 Katharine Adeney, Federalism and Ethnic Conflict Regulation in India and Pakistan (Basingstoke: Palgrave
Macmillan, 2007).
147 Author interview with Steve Tsang, director of SOAS University of London’s China Centre, January
2021.
34
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MAY 2021

How Pakistan and

Carnegie Endowment for International Peace

This publication can be downloaded at no cost at CarnegieEndowment.org.

Cover Photo: Chris Hondros/Getty Images

The Economic Corridor Takes Shape 4

The Impact of the 2018 Pakistani Elections 10

About the Authors 25

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | i

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 1

Although many observers portray Chinese activities in Pakistan as Beijing-driven, one-size-fits-all

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 3

The Economic Corridor Takes Shape

The Routes of the Economic Corridor

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 5

Project Name Location Estimated Cost Executing Completion

SOURCES: the CPEC (official website) and various news sources

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 7

The Port of Gwadar

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 9

The Impact of the 2018 Pakistani Elections

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 11

The Rise of SEZs

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 13

Province/Area Location Progress

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 15

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 17

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 19

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 21

Lessons for Pakistan

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 23

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 25

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 27

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 29

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 31

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE | 33

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