The China-Pakistan Economic Corridor, or CPEC for short, is a $62 billion connectivity project that will link China’s landlocked Xinjiang region with Pakistan’s Arabian Sea coast.
It is part of China’s ‘One Belt, One Road’ initiative and the link between two major economic corridors: the Silk Road Economic Belt and the Southeast Asian Maritime Silk Road. For Pakistan, the corridor includes energy projects, industrialisation and the expansion of the Gwadar Port. It also includes major infrastructure development – the envisioned CPEC rail and road networks build off of the existing infrastructure in Pakistan by either upgrading or extending operational and under construction roads and rail lines.
History of CPEC
The CPEC was formally launched in 2015, but it builds off robust bilateral relations between Pakistan and China that go back to the 1950s. The partnership between the two countries had largely been diplomatic and strategic, but the CPEC marked a new phase by adding an economic dimension to the relationship.
Here’s a brief history of Sino-Pak relations and the launch of CPEC:
1951: Pakistan recognises Communist China
On 21 May 1951, Pakistan became one of the first non-communist countries to recognise the People’s Republic of China, and the two countries established formal diplomatic relations.
1956: Pakistan and China sign treaty of friendship
In October 1956, Pakistani Prime Minister Huseyn Shaheed Suhrawardy and Chinese Premier Zhou Enlai signed a bilateral treaty of friendship.
1958: Gwadar joins Pakistan
In September 1958, the Islamic Republic of Pakistan purchased the territory of Gwadar from the Sultanate of Muscat and Oman for a sum of $8.4 million. Gwadar had been under Omani control since 1784, and the control was then shifted to Pakistan.
1963: Pakistan and China sign Sino-Pak Agreement
In 1963, Pakistan and China concluded a boundary agreement through peaceful negotiations. Pakistan is the only country in the region who has never had any border dispute with China.
1964: PIA start flights to Beijing
Pakistan International Airlines started its flights to Beijing in 1964. This was the first time a non-communist country airline flew into the People’s Republic of China, entering a new era of relationship between the two countries as Pakistan was the window for China to interact with the rest of the world.
1971: Pakistan facilitates US-China Talks
Pakistan played a pivotal role in the establishment of relations between China and the United States. Islamabad served as an intermediary for backchannel talks between Washington and Beijing – US Secretary of State Henry Kissinger flew secretly from Islamabad to Beijing in July 1971 to meet with Chinese Premier Zhou Enlai. This paved way for the first ever contact between the two countries and eventually led to the normalisation of Sino-American relations.
1976: Pak-China sign Agreement on Scientific and Cultural Cooperation
Pakistan and China sign the Agreement on Scientific and Cultural Cooperation, opening huge opportunities for Pakistani scientists and students.
1979: Karakoram Highway Opens for Public
After two decades of construction and the loss of hundreds of workers’ lives, the Karakoram Highway opened for public. The 800-mile long road, which is deemed to be a construction miracle, links the mountainous Northern Pakistan with Western China.
2001: China agrees to finance Gwadar Port development
In May 2001, on a state visit to Pakistan, Chinese Premier Zhu Rongji agreed to finance the first phase of the construction of the Gwadar port. Beijing also agreed to finance the construction of the Makran Coastal Highway, which now connects Gwadar to Karachi, Pakistan’s largest city.
2007: Operations begin at Gwadar Port
On 23 March 2007, the Singapore-based PSA International assumed operation of the Gwadar port. PSA International was awarded the port concession in December 2006.
2010: Pakistan and China sign $30 Billion Aid & Investment Deal
In 2010, Pakistan and China concluded approximately $30 billion in bilateral and private investment agreements during Chinese Premier Wen Jiabao’s visit to Pakistan.
2013: Gwadar leasing rights transferred to Chinese company
In February 2013, leasing rights for the Gwadar port were transferred from PSA International to China Overseas Ports Holding Company. Direct talks between PSA and China Harbour Engineering Company, another Chinese-owned enterprise, began in 2012.
2013: Pakistan and China agree to develop CPEC Plan
During a visit to China in July 2013, Pakistani Prime Minister Nawaz Sharif agreed to develop the long term plan for an economic corridor between Pakistan and China.
2015: Formal inauguration of CPEC
On 20 April 2015, Chinese President Xi Jinping visited Pakistan, where he formally inaugurated the China Pakistan Economic Corridor.
- November: CPEC became partially operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.
- March: An oil refinery and irrigation projects worth $1.5 billion and a $2 billion motorway spanning from DI Khan to Chitral is agreed upon.
- July: The Sahiwal Coal Power Project became fully operational. It was worth $1.8 billion.
- September: More than $14 billion worth of CPEC projects under construction.
- March: Pakistan began construction of hydro-power energy projects.
- October: Saudi Arabia partners up with CPEC to help finance three road and energy projects.
- February: Saudi Arabia commits $20 billion to Pakistan and CPEC, including the construction of a new oil refinery in Gwadar.
- March: Prime Minister Imran Khan performs the groundbreaking ceremony for the new Gwadar Airport. The airport is set to be the biggest in Pakistan, and will be built at the cost of $230 million.
- August: A railway network from China and Afghanistan to Gwadar deep sea port is planned. The project will cost about $2.3 billion.
- January: First liquified petroleum gas plant in Gwadar becomes fully functional.
- October: Construction of the 392 kilometer long Sukkur-Multan motorway was completed.
CPEC is expected to be completed, bringing prosperity to Pakistan and China and promoting economic growth within South and Central Asia.
Benefits of CPEC
CPEC is a framework of regional connectivity that will not only benefit China and Pakistan but will have a positive impact on India, Central Asian Republic, Afghanistan and Iran. The enhanced road, rail and air transport system will not only make movement easier, but also provide a number of opportunities for higher volume of trade and businesses. The energy projects will help tackle Pakistan’s ongoing energy crisis.
Here are some benefits of the CPEC projects:
- Connecting the North to the South
Phase 2 of the Karakoram Highway connects Thakot and Havelian in Khyber Pakhtunkhwa in a 120km-long highway. The road, which cost around $1.36 billion and was completed in 2020, helped establish a network of travel from north to the south.
- Clean Energy Project
The Quaid-e-Azam Solar Power Park in Bahawalpur is the largest solar power plant in the country. It not only generated jobs but is the biggest solar energy project in the country. The 4×100 MW project was attained in August 2016 and a 600MW extension is currently under construction.
- Gwadar to become a major global port city
Gwadar is expected to be one of the busiest shipping ports in South Asia as it will be the gateway of trade linking China with markets in South and Central Asia. More than 500,000 professionals are expected to be working in the city by 2023.
- 2,000 km of rail and road networks
The chains of rail and road networks being built from north to south will provide both investors and public with ease of movement. It is expected that improved infrastructure will add around $2-2.5 billion of revenues to the economy of Pakistan.
- Employment opportunities
Coordinated by the Ministry of Water and Power of Pakistan, Sahiwal’s Coal Fired Power Plant was completed in 2017. The fully operational plant delivers 1.3MW of energy and provides employment to more than 3000 locals.
It is estimated that 800,000 employment opportunities will be made available in the next two decades, owing to the expanding projects and investments of CPEC.
- Dealing with Pakistan’s energy crisis
$35 billion is being invested to construct 19 power plants in Pakistan, promising to bring 12,114 MW of energy. This investment will provide Pakistan with its energy crisis solutions.
- 2.5% Projected GDP growth
The CPEC projects promise to boost Pakistan’s GDP by 2-2.5%.
To facilitate commercial and economic development, Pakistan promises to set up economic zones as well.