China-Pakistan Economic Corridor: Opportunities and Risks

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What’s new? Pakistani leaders say the China-Pakistan Economic Corridor (CPEC), launched in 2015, is a “game changer” for the country’s ailing economy. But opaque plans for the corridor, the upheaval likely to affect locals along its route, and profits flowing mostly to outsiders could stir unrest. The government has repressed CPEC critics. Why does it matter? CPEC could help revive Pakistan’s economy. But if it moves ahead without more thorough debate in parliament and provincial legislatures and consultation with locals, it will deepen friction between the federal centre and periphery, roil provinces already long neglected, widen social divides and potentially create new sources of conflict.

What should be done? The government that assumes power after the July 2018 elections should encourage debate about CPEC; consult with business leaders, civil society and locals affected; ensure landowners receive fair compensation; encourage hiring local labour; and allow space for dissent. Beijing and Chinese companies involved should support such measures.

Executive Summary

Envisaged in mid-2013 and launched in April 2015, the China-Pakistan Economic Corridor (CPEC), a set of projects under China’s Belt and Road Initiative, marks a new era of economic ties in a bilateral relationship historically defined by security cooperation. Pakistan’s economy clearly needs reform to better serve its people, and many officials say CPEC will help in this regard. But as currently rolled out, the corridor risks aggravating political tension, widening social divides and generating new sources of conflict in Pakistan. The government that assumes power after Pakistan’s July elections should mitigate these risks by being more transparent about CPEC plans, consulting all stakeholders, including smaller provinces, the business community and civil society, and addressing concerns that the corridor subordinates Pakistan’s interests to those of China. For its part, Beijing also should consult stakeholders in regions that will host CPEC projects it agrees upon with Islamabad. It should encourage Chinese companies to display sensitivity to residents of those areas, including by hiring local labour.