In a major geopolitical shift, China has walked away from Pakistan’s most ambitious China-Pakistan Economic Corridor (CPEC) project, the Main Line-1 (ML-1) railway upgrade. The decision follows Pakistan Prime Minister Shehbaz Sharif’s recent visit to Beijing, where he failed to secure fresh funding or major projects under CPEC Phase-2. Instead, he returned with Memoranda of Understanding (MoUs) worth $8.5 billion, mainly in agriculture, electric vehicles, solar energy, health, and steel, but no headline investments.
At the same time, Islamabad’s warming relations with Washington, and India’s growing closeness with China and Russia after the Shanghai Cooperation Organisation (SCO) summit in Tianjin, have added a complex geopolitical backdrop to Beijing’s disengagement.
What is CPEC project?
The China–Pakistan Economic Corridor (CPEC) is a major infrastructure project aimed at connecting China’s northwestern Xinjiang region to Pakistan’s Arabian Sea port of Gwadar through a network of roads, railways, pipelines, and energy projects. CPEC spans approximately 3,000 km and forms a critical part of China’s Belt and Road Initiative (BRI).
The corridor is expected to enhance regional connectivity by linking South Asia, Central Asia, the Middle East, and Africa. It is intended to boost trade between China and Pakistan, facilitate Chinese energy imports, and foster economic growth, with investments estimated to exceed $60 billion.
According to a CNN-News-18 report, during his six-day visit, Sharif admitted to Chinese investors that Pakistan’s security environment posed risks but pledged tighter protection for Chinese nationals.
He also promised to remove bureaucratic bottlenecks after investors raised concerns about delays and red tape. However, his unilateral announcement of the “formal launch” of CPEC 2.0 without Chinese endorsement only highlighted the lack of alignment.
What China’s withdrawal from CPEC project means?
As per reports, China’s withdrawal from the ML-1 railway project, once the centrepiece of CPEC, has forced Pakistan to turn to the Asian Development Bank (ADB) for financing. Islamabad is now seeking a $2 billion loan to upgrade the Karachi–Rohri section of the line, part of the 1,800-kilometre route from Karachi to Peshawar.
Originally, China had pledged around $60 billion in CPEC investments, with ML-1 billed as the largest and most transformative. But after nearly a decade of negotiations and Pakistan’s deepening fiscal woes, Beijing’s appetite for funding such a high-risk project has waned.
Why China stepped back?
Beijing’s disengagement reflects a wider recalibration of its overseas spending. With its own economy under pressure and debt repayment risks mounting in partner countries, China is pulling back from high-exposure projects. Pakistan’s mounting arrears to Chinese power producers and repeated bailouts from the International Monetary Fund have made it a particularly risky bet.
This retreat does not necessarily spell the end of CPEC, but it does highlight its loss of momentum. After a burst of activity between 2015 and 2019, few major projects have materialised, and unpaid dues remain a sore point in the relationship.
Is it the Reko Diq-Washington factor?
The urgency to modernise Pakistan’s railways is amplified by the Reko Diq copper and gold mine in Balochistan, being developed by Barrick Gold of Canada, which apparently Washington has its eyes on. Expected to become a vital source of export revenue, the mine requires a reliable transport network. The current railway system is outdated and incapable of handling the anticipated heavy cargo.
Recognising this, the ADB has already pledged $410 million for infrastructure tied to Reko Diq, strengthening its role in Pakistan’s long-term export strategy.
Turning to the ADB marks a diplomatic shift as well as a financial one. For the first time, a multilateral lender is taking the lead on what was meant to be a flagship Belt and Road Initiative (BRI) project. According to sources, Pakistan informed China in advance, reflecting its delicate balancing act.
Pakistan’s army chief, Asim Munir, recently summarised the country’s stance, saying, “We will not sacrifice one friend for the other.” With the United States also showing renewed interest in Pakistan’s mineral wealth, including Reko Diq, Islamabad is seeking to diversify its partnerships while maintaining cordial ties with Beijing.
China’s pullback from Pakistan highlights the risks of relying too heavily on a single partner for strategic infrastructure. Meawhile, with US–China tensions intensifying and India’s rapprochement with Beijing and Moscow, Pakistan’s balancing act will only become more complex.