China–Pakistan Economic Corridor (CPEC)
The China–Pakistan Economic Corridor (CPEC) is a flagship of Beijing's Belt and Road Initiative, linking Pakistan's Gwadar and Karachi ports to China's Xinjiang region. Its cost has risen from an initial $46 billion to $65 billion.
China–Pakistan Economic Corridor (CPEC) — Part 1
The China–Pakistan Economic Corridor (CPEC) is of strategic importance to both China and Pakistan. Agreements to implement the project were signed between the People’s Republic of China and Pakistan in 2013–2015. The project links the Pakistani ports of Gwadar and Karachi to China’s Xinjiang Uyghur Autonomous Region and is meant to develop the necessary infrastructure rapidly and strengthen Pakistan’s economy by building modern transport networks and numerous energy projects and setting up special economic zones. The project’s cost is estimated to have risen from an initially planned $46 billion to $65 billion.
CPEC is a central part and an extension of China’s global Belt and Road Initiative and plays a key role in South Asia. For Pakistan, the main goals of CPEC are to build, modernise and develop the country’s infrastructure (roads, ports, railway networks); to achieve economic growth and create a large number of jobs (by building infrastructure and shifting the economy from agriculture to industry); to ensure energy security (building power facilities, including coal-fired thermal plants, hydropower, wind power and solar collectors, as well as pipeline networks to import oil, gas and LNG from Iran and other Gulf states); and to secure regional integration (expanding trade and economic integration between China and Pakistan, Central Asia, South Asia, the Middle East and Africa).
Pakistan’s government calculated that implementing CPEC, in the transport network (roads and railways) alone, would deliver an additional 3.55% of GDP growth each year. CPEC’s impact on Pakistan’s economy is compared to the Marshall Plan, which the United States carried out after the Second World War to rebuild Western Europe. Pakistan’s authorities projected that between 2015 and 2030 CPEC would create more than 2.3 million jobs and add 2% to 2.5% to the country’s annual economic growth. Tackling Pakistan’s acute energy shortage would provide a further significant boost to GDP growth under CPEC.
In addition, CPEC special economic zones in Pakistan are pursuing plans to develop industries such as food processing, vegetable oil, ceramics, precious stones and jewellery, marble and minerals, and agricultural machinery; to build iron and steel works and oil refineries; and to assemble motorcycles, electrical appliances and cars, among other sectors.
China–Pakistan Economic Corridor (CPEC) — Part 2
As for the benefits to China, CPEC — which consists of a sea corridor and a land corridor — is intended to secure and shorten the route for exporting and importing goods, including energy (oil, gas and LNG), to China from the Middle East, Iran included, avoiding the existing sea route through the Malacca Strait between Malaysia (Peninsular Malaysia) and Indonesia (the Indonesian island of Sumatra). That route could be blocked if a sharp US–China conflict broke out, threatening China’s economy, which depends heavily on external supplies of hydrocarbons.
A little on the Malacca Strait: it connects the Andaman Sea basin of the Indian Ocean with the South China Sea basin of the Pacific Ocean. The southern approach to the strait lies in the waters of Singapore. The Malacca Strait, along with the Suez and Panama canals, is one of the world’s most important sea routes, linking the Indian and Pacific Oceans. Maritime trade between the world’s most populous states — India, Indonesia and China — passes through the strait, as does trade between other South-East Asian states. An estimated 50,000 ships a year pass through it, accounting for up to a quarter of all maritime trade worldwide.
Developing the deep-water port of Gwadar on the Arabian Sea and building a reliable road and rail network from the port in Pakistan to China’s Xinjiang region under CPEC will provide the shortest route for delivering critical goods to China. For example, CPEC will cut oil transport to China from 12,000 km to just 2,395 km, saving China up to $2 billion a year. Gwadar is currently under Chinese management, which also lets China expand its influence in the Indian Ocean, the vital oil route between the Atlantic and the Pacific. About 80% of the Middle Eastern oil China imports also passes through the Malacca Strait.
Besides the Malacca Strait’s vulnerability for energy supplies, China also depends on sea routes through the South China Sea, where the disputed Spratly and Paracel islands are a source of tension between China and Taiwan, Vietnam, the Philippines and the United States. CPEC thus also lets China bypass these disputed areas by using an alternative route to the west, that is, through Pakistan.
At the same time, as of 2024 CPEC is the most developed land corridor of China’s global Belt and Road Initiative. Back in 2017 the American magazine Forbes said CPEC was part of China’s vision for shaping the rules of the next era of globalisation and sustaining its export and investment capacity for years to come.
China–Pakistan Economic Corridor (CPEC) — Part 3
Beyond the opportunities CPEC offers China described above, the economic corridor strengthens political and economic ties between China’s eastern, central and western provinces. It improves the prospects for attracting public and private investment to the Chinese provinces of Xinjiang, Tibet and Qinghai, supporting Beijing’s development plans for western China as a whole.
Thanks to the benefits of CPEC, the combined distance from Gwadar across Pakistan to Xinjiang, plus the distance from Xinjiang to China’s east coast, will be about 6,000 km instead of the current 12,000 km through the Malacca Strait and the South China Sea, significantly cutting the time and distance for delivering Chinese imports and exports to the Middle East, Africa and Europe.
Under CPEC, the Central Asian states reach Pakistan’s Arabian Sea ports through the city of Kashgar in Xinjiang, and Pakistan likewise reaches Central Asian markets through this historic city. The corridor’s northern hub is therefore the city of Kashgar in Xinjiang, its intermediate hub is the Gilgit-Baltistan region in the Pakistani part of Kashmir, and its southern hub is the Pakistani port of Gwadar on the Arabian Sea. Besides roads, railways, oil pipelines and gas pipelines, CPEC will also connect Pakistan and China with power transmission lines and fibre-optic communications.
Under mutual agreements, Pakistani and Chinese navy ships are to jointly protect the security of the CPEC economic and trade corridor in the Arabian Sea. Lying near the mouth of the Persian Gulf, Gwadar is strategically important: it allows control over several key sea routes from Africa and Europe to South-East Asia and the Pacific via the Red Sea, the Persian Gulf, the Strait of Hormuz and the Gulf of Oman.
China–Pakistan Economic Corridor (CPEC) and India — Part 4
India and Pakistan-plus-China are regional rivals in South Asia. India opposes the China–Pakistan Economic Corridor, accusing Pakistan and China of occupying part of its territory, violating India’s territorial sovereignty and routing the corridor through the disputed territories of Kashmir.
Kashmir is a zone of tension between India, Pakistan and China, which all occupy parts of its territory. Kashmir borders Afghanistan to the north; the Chinese regions of Xinjiang and Tibet to the north and north-east; the Indian states of Himachal Pradesh and Punjab to the south; and Pakistan to the west.
In practice Kashmir is divided into two Indian territories, Jammu and Kashmir and Ladakh (a combined area of 101,387 km²); the self-proclaimed, unrecognised state of Azad Kashmir (“Free Kashmir”, 13,000 km²) and the Gilgit-Baltistan region (72,500 km²), both under Pakistani control; and the Aksai Chin area under Chinese control (37,555 km²). Kashmir’s total area is 222,236 km².
Srinagar, the central city of Jammu and Kashmir in India, was a crossroads of caravan routes, including the historic Silk Road between the Far East, Central Asia, the Middle East and South Asia. Northern Kashmir was mainly Muslim, the south Hindu and the east Buddhist.
India is also concerned by the continued presence of Chinese navy ships at the Pakistani port of Gwadar, which China has leased for 40 years. As noted earlier, Gwadar occupies a strategic position, giving China the shortest route to the markets and resources of the Middle East and Africa and to Europe’s wealthy markets.
China–Pakistan Economic Corridor (CPEC) and India — Part 5
Beyond all this, India sees China’s continued presence in Gwadar as a potential threat to its hydrocarbon supplies. India is the world’s third-largest consumer of oil, after China and the United States. Middle Eastern oil accounted for about 48% of its total imports in November 2024. Russia supplied 13% less oil than in October of that year, selling 1.52 million barrels per day, which accounted for about 32% of India’s total consumption.
India is also irritated by the prospect of Pakistan gaining access to Central Asian markets, including for hydrocarbons, through Afghanistan, should the political and economic situation in that South Asian Muslim country improve and its security hold.
At the same time, in India’s view, the China–Pakistan Economic Corridor serves almost exclusively China’s economic interests. China in effect backs Pakistan’s position on the Kashmir dispute with India.
Given the above, and the CPEC project, India is actively promoting, together with Russia and Iran, the International North–South Transport Corridor (INSTC), an ambitious project to create a multimodal passenger and freight route from the seaport of St Petersburg across Iran to Mumbai, one of the largest ports on India’s west coast, with a total length of 7,200 km. Its main advantages are halving the distance of carriage and cutting transit time by 40% and transport costs by 30% compared with the international sea route through the Suez Canal, which is 14,500 km long.
The North–South corridor gives Russia access to the large, fast-growing markets of Iran, India, South-East Asia, Africa and the Middle East, and gives India and Iran access to the markets of Russia, Northern and Western Europe via the Baltic Sea, and of Central Asia and Afghanistan via the corridor’s eastern route. Iran becomes the key country in the corridor, since all these routes will pass through it.