China–Pakistan Economic Corridor

China–Pakistan Economic Corridor (CPEC) (Chinese: 中巴经济走廊; pinyin: Zhōng bā jīngjì zǒuláng; Urdu: چین پاکستان اقتصادی راہداری) is a 3,000 km Chinese infrastructure network project in construction in Pakistan. This sea-and-land-based corridor is aimed to secure and reduce the passage for China's energy imports from the Middle East, by avoiding the existing route from the Straits of Malacca between Malaysia and Indonesia, which, in case of war could be blockaded, and thus hamper the Chinese energy-dependent economic avenues. Developing a deep water port at Gwadar in the Arabian Sea and a well built road and rail line from this port to Xinjiang region in western China would be a shortcut for boosting the trade between Europe and China. In Pakistan, it aims to overcome an electricity shortfall, infrastructural development and modernize transportation networks. Along with shifting it from an agricultural based economic structure to industrial based.

CPEC's potential impact on Pakistan has been compared to that of the Marshall Plan, undertaken by the United States in post-war Europe. Pakistani officials predict that CPEC will result in the creation of upwards of 2.3 million jobs between 2015 and 2030, and add 2 to 2.5 percentage points to the country's annual economic growth. As of 2022, it has enhanced Pakistan's exports and development capacity and has provided 1/4th of its total electricity.

It is also seen as addressing a national security issue for China by economic development of the Xinjiang region, thus reducing militant influence on Muslim separatists of native Uyghurs. After the proposal from Chinese President Li Keqiang in 2013, the preliminary study on this project was done in 2014, which acknowledged the hostile environment and complicated geographic conditions but prioritized the importance of having a China-run port near the Gulf of Oman which serves as an important route for oil tankers. Once this corridor is functional, the existing 12,000 km journey of oil transportation to China will be reduced to just 2,395 km. This is estimated to save China $2 billion per year. China had already acquired control of Gwadar Port on 16 May 2013. Originally valued at $46 billion, the value of CPEC projects was worth $62 billion as of 2020. In 2022, the Chinese investment in Pakistan rose to $65 billion. China refers to this project as the revival of the Silk Road. CPEC envisages rapidly upgrading Pakistan's required infrastructure and thereby strengthening its economy to an extent by constructing modern transportation networks, numerous energy projects, and special economic zones.

The potential industries being set up in the CPEC special economic zones include food processing, cooking oil, ceramics, gems and jewelry, marble, minerals, agriculture machinery, iron and steel, motorbike assembling, electrical appliances, and automobiles.

Even though China and Pakistan signed the official MoUs in 2015, the first details of the long-term plan under CPEC were publicly disclosed in 2017 when a Pakistani media outlet revealed its access to the Original Documents.

According to the World Bank researchers, "Chinese lenders require strict confidentiality from their debtors and do not release a granular breakdown of their lending." In 2015, the Governor of Central Bank in Pakistan, Ashraf Mahmood Wathra said, "I don't know out of $46 billion, how much is debt, how much is equity and how much is in kind" and did not know what the debt implications of CPEC actually were.

Since the early 1990s, the IMF has provided more than a dozen bailouts on requests by Pakistan to save its dwindling economy, which has struggled for 22 of the 30 years to meet the austerity measures demanded by IMF. Nadeem-ul-Haque, a former IMF official and former deputy chairman of the Pakistani government's Planning Commission wrote, "The pattern is always the same, with the Fund's blessing, the government goes on a shopping spree, taking out costly loans for expensive projects, thus building up even more debt and adding new inefficiencies. After a few years, another crisis ensues, and it is met by another IMF program." The Pakistani establishment sees Chinese loans as an alternative to IMF loans. Should the initial $46 billion worth of projects be implemented, the value of those projects would be roughly equivalent to all foreign direct investment in Pakistan since 1970, and would be equal to 17% of Pakistan's 2015 gross domestic product. CPEC is seen as the main plank of China's Belt and Road Initiative.

Chinese monetary offer for Pakistan under CPEC being a combination of Debt and Equity, it is evaluated that the Debt component will be serviced at 7–8% interest per annum while the equity component is expected to deliver an estimated ROE of 17% per annum. The Pakistan government, however, claims that the Chinese loans will be repaid over 20–25 years at a rate of 2% interest. Pakistan has already started negotiating the debt-relief from China owing to difficulties to repay the loan and is seeking ease in the payment obligations towards debt and its interest for the projects under CPEC. As of 2022, Pakistan owes China about $30 billion which accounts for nearly 30% of its foreign debt.

Since 2021, due to the growing pressure on China for being the world's biggest polluter, it has shifted its focus from coal-based energy investments in Pakistan to renewables. This is done to promote a more "greener" image of CPEC. In June 2022, the Karot Hydropower started commercial operations to provide cheap and clean electricity and aims to reduce 3.5 million metric tons of carbon emissions annually.