China–Pakistan Economic Corridor

China–Pakistan Economic Corridor (CPEC)
System information
Length:	2,442 km (1,517 mi)

The China–Pakistan Economic Corridor (Chinese: 中国-巴基斯坦经济走廊; Urdu: پاكستان-چین اقتصادی راہداری‎; also known as CPEC) is an economic corridor comprising a collection of projects currently under construction at a cost of $51 billion.^[1] CPEC aims to facilitate trade along an overland route that connects Kashgar and Gwadar, through the construction of a network of highways, railways, and pipelines.^[2][3]

The corridor is intended to rapidly expand and upgrade Pakistani infrastructure, as well as deepen and broaden economic links between Pakistan and the People's Republic of China.^[4] It is considered to be an extension of China's ambitious One Belt, One Road initiative,^[5] and the importance of CPEC to China is reflected by its inclusion as part of China's 13th five-year development plan.^[6][7]

Pakistani officials predict that the project will result in the creation of upwards of 700,000 direct jobs between 2015–2030, and add 2 to 2.5 percentage points to the country's annual economic growth.^[8] Were all the planned projects to be implemented, the value of those projects would be equal to all foreign direct investment in Pakistan since 1970,^[9] and would be equivalent to 17% of Pakistan's 2015 gross domestic product.^[10]

Infrastructure projects under the aegis of CPEC will span the length and breadth of Pakistan, and will eventually link the city of Gwadar in southwestern Pakistan to China's northwestern autonomous region of Xinjiang via a vast network of highways and railways.^[11] Proposed infrastructure projects are worth approximately $11 billion, and will be financed by heavily-subsidized concessionary loans^[12] that will be dispersed to the Government of Pakistan by the Exim Bank of China, China Development Bank, and the Industrial and Commercial Bank of China.^[13] As part of the broad package of infrastructure projects under CPEC, a 1,100 kilometre long motorway will be constructed between the cities of Karachi and Lahore,^[14] while the Karakoram Highway between Rawalpindi and the Chinese border will be completely reconstructed and overhauled.^[9] The Karachi–Peshawar main railway line will also be upgraded to allow for train travel at up to 160 kilometres per hour by December 2019.^[15][16] Pakistan's railway network will also be extended to eventually connect to China's Southern Xinjiang Railway in Kashgar.^[17] A network of pipelines to transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion pipeline between Gwadar and Nawabshah to eventually transport gas from Iran.^[18]

Over $33 billion worth of energy infrastructure are to be constructed by private consortia to help alleviate Pakistan's chronic energy shortages,^[19] which regularly amount to over 4,500MW,^[20] and have shed an estimated 2–2.5% off Pakistan's annual gross domestic product.^[21] Over 10,400MW of energy generating capacity is to be developed between 2018 and 2020 as part of the corridor's fast-tracked "Early Harvest" projects in conjunction with four projects under construction prior to the announcement of CPEC.^[22] Electricity from these projects will primarily be generated by coal, though wind projects are included under CPEC, as is the construction of one of the world's largest solar energy plants.^[23]

On 13 November 2016 the first trade activity took place through CPEC. Cargo from China was trucked down via the corridor and loaded on to ships at Gwadar port, headed to markets in West Asia and Africa.^[24] In November 2016, China announced an additional $8.5 billion investment in Pakistan with $4.5 billion allocated to upgrade Pakistan's main railway line from Karachi to Peshawar including tracks, speed and signalling. And $4 billion toward an LNG terminal and transmission lines to help alleviate energy shortages, taking the total level of investment to $55 billion.^[25]

Pakistan Navy and Chinese Navy ships are to jointly guard the safety and security of the trade corridor, as Pakistan seeks to expand the role of its maritime forces.^[26]

History

External video

China Reaches Out to Pakistan With Massive Economic Plan.

Plans for a corridor stretching from the Chinese border to Pakistan's deep water ports on the Arabian Sea date back to the 1950s, and motivated construction of the Karakoram Highway beginning in 1959.^[27] Chinese interest in Pakistan's deep-water harbour at Gwadar had been rekindled by 1998 and in 2002 China began construction at Gwadar port which was completed in 2006. Expansion of Gwadar Port then ceased thereafter owing to political instability in Pakistan following the fall of General Pervez Musharraf and subsequent conflict between the Pakistani state and Baloch militants.^[28]

External video

CNN talks to Jamie Metzl, a Sr. Fellow at the Atlantic Council, about China and Pakistan's economic plans.

The current form of the project was first proposed by General Pervez Musharraf,^[29] however it was postponed owing to the political instability in the country that followed Musharraf's step down. The subsequent government of the Pakistan Peoples Party proposed it again when President Asif Ali Zardari invited heads of all the political parties to a Luncheon in honour of the Chinese Premier Li Keqiang at the Aiwan-e-Sadr on 22 May 2013.^[30] Chinese Premier Li Keqiang and the Pakistani President Asif Ali Zardari have agreed to build an economic corridor between the two countries. Both sides have decided to further enhance mutual connectivity and both sides are connected to develop the long term plan for a China-Pakistan economic corridor.^[30]

In February 2014, Pakistani President Mamnoon Hussain visited China to discuss the plans for an economic corridor in Pakistan.^[31] Two months later, Pakistan Prime Minister Nawaz Sharif met with Premier Li Kequiang in China to discuss further plans,^[32] resulting in the full scope of the project to be devised under Sharif's tenure.^[33] In November 2014, Chinese government announced its intention to finance Chinese companies as part of its $45.6 billion energy and infrastructure projects in Pakistan as part of CPEC.

During the state visit of Xi Jinping to Pakistan in April 2015, he wrote in an open editorial stating: "This will be my first trip to Pakistan, but I feel as if I am going to visit the home of my own brother." On 20 April 2015, Pakistan and China signed an agreement to commence work on the $46 billion agreement, which is roughly 20% of Pakistan's annual GDP,^[34] with approximately $28 billion worth of fast-tracked "Early Harvest" projects to be developed by the end of 2018.^[35] As a gesture of friendship, the Pakistani capital at that time was dotted with slogans and signboards such as "Pakistan-China friendship is higher than the mountains, deeper than the oceans, sweeter than honey, and stronger than steel"^[36] – an oft repeated phrase coined by the Chinese to describe their deep ties to Pakistan.

On 12 August 2015 in the city of Karamay, China and Pakistan signed 20 more agreements worth $1.6 billion to further augment the scale and scope of CPEC.^[37] Details of the plan are opaque,^[38] but are said to mainly focus on increasing energy generation capacity.^[39] As part of the agreement, Pakistan and China have agreed to co-operate in the field of space research.^[40]

In September and October 2015, the government of the United Kingdom announced two separate grants to the Government of Pakistan for construction of roadways that are complementary to CPEC.^[41][42] In November 2015, China included the CPEC into its 13th five-year development plan,^[43] while in December 2015, China and Pakistan agreed on a further $1.5 billion investment to set up an information and technology park as part of the CPEC project.^[44] On 8 April 2016, during the visit of Xinjiang's Communist Party chief Zhang Chunxian companies from Xinjiang with their Pakistan counterparts signed $2 billion of additional agreements covering infrastructure, solar power and logistics.^[45]

The first convoy under CPEC came from China, carrying almost 250 containers meant for export to ports in Bangladesh, Sri Lanka, the UAE and the EU arrived in Gwadar on November 13, 2016.^[46] On December 2, 2016, the first cargo train, launching the direct rail route and sea freight service between China and Pakistan, departed from Yunnan. A cargo train loaded with 500 tonnes of commodities left Kunming for the port city of Guangzhou from where the cargo will be loaded on ships and transported to Karachi, marking the opening of the new route.^[47] The new rail, sea freight will cut logistics cost, including that of transport, by 50 per cent.^[48]

Projects in Gwadar Port and City

Gwadar forms the crux of the CPEC project, as it is envisaged to be the link between China's ambitious One Belt, One Road project, and its Maritime Silk Road project.^[49] In total, more than $1 billion worth of projects are to be developed around the port of Gwadar by December 2017.

Gwadar Port Complex

Initial infrastructure works at Gwadar Port commenced in 2002 and were completed in 2007,^[28] however plans to upgrade and expand Gwadar's port stalled. Under CPEC agreement, Gwadar Port will initially be expanded and upgraded to allow for docking of larger ships with deadweight tonnage of up to 70,000.^[50] Improvement plans also include construction of a $130 million breakwater around the port,^[51] as well as the construction of a floating liquefied natural gas facility that will have a capacity of 500 million cubic feet of liquified natural gas per day and will be connected to the Gwadar-Nawabshah segment of the Iran–Pakistan gas pipeline.^[52]

The expanded port is located near a 2,282 acre free trade area in Gwadar which is being modelled on the lines of the Special Economic Zones of China.^[53] The swathe of land was handed to the China Overseas Port Holding Company in November 2015 as part of a 43-year lease.^[54] The site will include manufacturing zones, logistics hubs, warehouses, and display centres.^[55] Businesses located in the zone would be exempt from customs authorities as well as many provincial and federal taxes.^[56] Business established in the special economic zone will be exempt from Pakistani income, sales, and federal excise taxes for 23 years.^[57] Contractors and subcontractors associated with China Overseas Port Holding Company will be exempted from such taxes for 20 years,^[58] while a 40-year tax holiday will be granted for imports of equipment, materials, plant/machinery, appliances and accessories that are to be for construction of Gwadar Port and special economic zone.^[59]

The special economic zone will be completed in three phases. By 2025, it is envisaged that manufacturing and processing industries will be developed, while further expansion of the zone is intended to be complete by 2030.^[28] On 10 April 2016, Zhang Baozhong, chairman of China Overseas Port Holding Company said in a conversation with The Washington Post that his company planned to spend $4.5 billion on roads, power, hotels and other infrastructure for the industrial zone as well as other projects in Gwadar city.^[8]

Projects in Gwadar city

China will grant Pakistan $230 million to construct a new international airport in Gwadar which is to be operational by December 2017.^[60] The provincial government of Balochistan has set aside 4000 acres for the construction of the new $230 million Gwadar International Airport which will require an estimated 30 months for construction,^[61] the costs of which are to be fully funded by grants from the Chinese government which Pakistan will not be obliged to repay.^[62]

The city of Gwadar is further being developed by the construction of a 300MW coal power plant, a desalinisation plant, and a new 300 bed hospital.^[63] Plans for Gwadar city also include construction of the East Bay Expressway – a 19 kilometre controlled-access road that will connect Gwadar Port to the Makran Coastal Highway.^[64] These additional projects are estimated to cost $800 million, and are to be financed by 0% interest loans extended by the Exim Bank of China to Pakistan.^[63]

In addition to the aforementioned infrastructure works, the Pakistani government announced in September 2015 its intention to establish a training institute named Pak-China Technical and Vocational Institute at Gwadar,^[28] which is to be developed by the Gwadar Port Authority.^[65] The institute is to be completed by March 2016 at the cost of 943 million rupees,^[28] and is designed to impart to local residents the skills required to operate and work at the expanded Gwadar Port.^[28]

Roadway projects

The CPEC project envisages major upgrades and overhauls to Pakistan's transportation infrastructure. Under the CPEC project, China has announced financing for $10.63 billion worth of transportation infrastructure so far; $6.1 billion have been allocated for constructing "Early Harvest" roadway projects at an interest rate of 1.6 percent.^[66] The remainder of funds will be allocated when the Pakistani government awards contracts for construction of road segments which are still in the planning phase.

Three corridors have been identified for cargo transport: the Eastern Alignment though the heavily populated provinces of Sindh and Punjab where most industries are located, the Western Alignment through the less developed and more sparsely populated provinces of Khyber Pakhtunkhwa and Balochistan, and the future Central Alignment which will pass through Khyber Pakhtunkhwa, Punjab, and Balochistan.^[67]

Karakoram Highway reconstruction

The CPEC projects call for reconstruction and upgrade works on National Highway 35 (N-35), which forms the Pakistani portion of the Karakoram Highway (KKH). The KKH spans the 887 kilometre long distance between the China-Pakistan border and the town of Burhan, near Hasan Abdal. At Burhan, the existing M1 motorway will intersect the N-35 at the Shah Maqsood Interchange. From there, access onwards to Islamabad and Lahore continues as part of the existing M1 and M2 motorways. Burhan will also be at intersection of the Eastern Alignment, and Western Alignment.

Upgrades to the 487 kilometer long section between Burhan and Raikot of the Karakoram Highway are officially referred to in Pakistan as the Karakoram Highway Phase 2 project. At the southern end of the N-35, works are already underway to construct a 59-kilometer-long, 4-lane controlled-access highway between Burhan and Havelian which upon completion will be officially referred to as the E-35 expressway.^[68] North of Havelian, the next 66 kilometres of road will be upgraded to a 4-lane dual carriageway between Havelian and Shinkiari,^[69] Groundbreaking on this portion commenced in April 2016.^[70]

The entire 354 kilometres of roadway north of Shinkiari and ending in Raikot, near Chilas will be constructed as a 2-lane highway.^[71] Construction on the first section between Shinkiari and Thakot commenced in April 2016 jointly with construction of the Havelian to Shinkiari 4-lane dual carriageway further south.^[72] Construction on both these sections is expected to be completed with 42 months at a cost of approximately $1.26 billion with 90% of funding to come from China's EXIM bank in the form of low interest rate concessional loans.^[72][73][74]

Between Thakot and Raikot spans an area in which the government of Pakistan is currently either planning or actively constructing several hydropower projects, most notably the Diamer-Bhasha Dam and Dasu Dam. Sections of the N-35 around these projects will be completely rebuilt in tandem with dam construction.^[75] In the interim, this section of the N-35 is currently being upgraded from its current state until dam construction commences in full force at a later date. Improvement projects on this section are expected to be completed by January 2017 at a cost of approximately $72 million.^[76][77] The next 335 kilometres of roadway connect Raikot to the China-Pakistan border. Reconstruction works on this section of roadway preceded the CPEC, and were initiated after severe damage to roadways in the area following the 2010 Pakistan floods. Most of this section of roadway was completed in September 2012 at a cost of $510 million.^[78]

A large earthquake rocked the region nearest to the China-Pakistan border in 2010, triggering massive landslides which dammed the Indus River, resulting in the formation of the Attabad Lake. Portions of the Karakoram Highway were submerged in the lake, forcing all vehicular traffic onto barges to traverse the new reservoir. Construction on a 24 kilometre series of bridges and tunnels to Attabad Lake began in 2012 and required 36 months for completion. The bypass consists of 2 large bridges and 5 kilometres worth of tunnels that were inaugurated for public use on 14 September 2015 at a cost of $275 million.^[79][80] The 175 kilometre road between Gilgit and Skardu will be upgraded to a 4-lane road at a cost of $475 million to provide direct access to Skardu from the N-35.^[81][82]

Eastern Alignment

The term Eastern Alignment of CPEC refers to roadway projects located in Sindh and Punjab provinces - some of which were first envisioned in 1991.^[83] As part of the Eastern Alignment, a 1,152 km long motorway will connect Pakistan's two largest cities, Karachi and Lahore with 4 to 6-lane controlled access highway designed for travel speeds up to 120 kilometres per hour.^[84] The entire project will cost approximately $6.6 billion, with the bulk of financing to be distributed by various Chinese state-owned banks.^[85]

The entire Eastern Alignment motorway project is divided into four sections: a 136 kilometre long section between Karachi and Hyderabad also known as the M9 motorway, a 296 kilometre long section between Hyderabad and Sukkur, a 387 kilometre long section between Sukkur and Multan, and a 333 kilometre section between Multan and Lahore via the town of Abdul Hakeem.^[86]

The first section of the project will provide high speed road access from the Port of Karachi to the city of Hyderabad and interior Sindh. Upgrade and construction works on this section currently known as Super Highway between Karachi and Hyderabad began in March 2015, and will convert the road into the 4-lane controlled access M9 Motorway which will be completed in an estimated 30 months.^[87]

At the terminus of the M9 motorway in Hyderabad, the Karachi-Lahore Motorway will continue onwards to Sukkur as a six lane controlled-access motorway known also as M6 motorway that will be 296 kilometers long,^[88] The planned cost for this project is $1.7 billion,^[89] and will provide high speed road access to interior Sindh – especially near the towns of Matiari, Nawabshah, and Khairpur. The project will require the construction of seven interchanges, and 25 bridges on the Indus river and irrigation canals.^[88] The planned route of the motorway runs roughly parallel to the existing National Highway and Indus Highway at various portions. In July 2016, the Pakistani government announced that the project would be open to international bidders on a build-operate-transfer basis, with Chinese and South Korean companies expressing interest in the project.^[90]

The 392 kilometre Sukkur to Multan section of the motorway is estimated to cost $2.89 billion,^[84] with construction works inaugurated on this section of roadway on May 6, 2016.^[91] The road will be a six lane wide controlled access highway,^[92] with 11 planned interchanges, 10 rest facilities, 492 underpasses, and 54 bridges along its route.^[91] The Pakistani government in January 2016 awarded the contact to build this section to China State Construction Engineering,^[84] but final approvals required for disbursement of funds were not granted by the Government of the People's Republic of China until May 2016.^[74][84] 90% of the project's cost is to be financed by concessionary loans from China, with the remaining 10% to be financed by the government of Pakistan.^[93] Construction on this segment is expected to last 36 months.^[84]

Construction of the portion between Multan and Lahore costing approximately $1.5 billion^[94] was launched in November 2015^[95] as a joint venture between the China Railway Construction Corporation Limited and Pakistan's Zahir Khan and Brothers Engineers^[96] The total length of this motorway section is 333 kilometres; however, the first 102 kilometres of the road between Khanewal and Abdul Hakeem is designed as part of the M4 Motorway, and is being funded by the Asian Development Bank.^[97][98] The portion of motorway between Abdul Hakeem and Lahore that is under construction as part of CPEC will consist of the remaining 231 kilometers.^[99]

Western Alignment

The CPEC project envisages an expanded and upgraded road network in the Pakistani provinces of Balochistan, Khyber Pakhtunkhwa, and western Punjab Province as part of the Western Alignment. The Western Alignment project will result in the upgrading of several hundred kilometres worth of road into 2 and 4-lane divided highways by mid-2018, with land acquisition sufficient for upgrading parts of the road to a 6-lane motorway in the future.^[100] In total, the CPEC project envisages re-construction of 870 kilometres of road in Balochistan province alone as part of the Western Alignment. Of those 870 kilometres of road, 620 kilometres have already been rebuilt as of January 2016.^[101]

The Western Alignment roadway network will begin at the Barahma Bahtar Interchange on the M1 Motorway near the towns of Burhan and Hasan Abdal in northern Punjab province.^[102] The newly reconstructed Karakoram Highway will connect to the Western Alignment at Burhan, near where the new 285 kilometre long controlled-access Brahma Bahtar-Yarik Motorway will commence.^[103] The motorway will terminate near the town of Yarik, just north of Dera Ismail Khan.^[104] Groundbreaking for the project took place on May 17, 2016.^[105] The motorway will traverse the Sindh Sagar Doab region, and cross the Indus River at Mianwali before entering into Khyber Pakhtunkhwa province. It will consist of 11 interchanges, 74 culverts, and 3 major bridges spanning the Indus, Soan, and Kurram Rivers.^[106] Total costs for the project are expected to be $1.05 billion.^[107]

At the southern terminus of the new Brahma Bahtar-Yarik motorway, the N50 National Highway will also be upgraded between Dera Ismail Khan in Khyber Pakhtunkhwa and Zhob in neighbouring Balochistan province, with eventual reconstruction between Zhob and Quetta.^[108] The upgraded roadway will consist of a 4 lane dual-carriageway spanning the 205 kilometre distance between the two cities.^[109] The first portion of the N50 to be upgraded will be the 81 kilometre portion of the N50 between Zhob and Mughal Kot, with construction works having begun in January 2016.^[110] Construction on this portion is expected to be completed by 2018 at a cost of $86 million.^[111] While the project is considered a vital link in the CPEC's Western Alignment,^[110] the project's cost will not be financed by Chinese state-owned banks, but instead by Asian Development Bank under a 2014 agreement which preceded CPEC,^[112][113] as well as by a grant provided by the United Kingdom's Department for International Development.^[114]

Heading south from Quetta, the Western Alignment of the CPEC will continue to the town of Surab in central Balochistan as the N25 National Highway. From Surab, a 470 kilometre long route known as the N85 National Highway will connect central Balochistan with the town of Hoshab in southwestern Balochistan province near the city of Turbat. This portion of roadway between Surab and Hoshab is 51% complete as of January 2016,^[115] and is expected to be completed in December 2016.^[116]

Along the Western Alignment route, the towns of Hoshab and Gwadar are connected by a newly-built 193 kilometre long portion of the M8 Motorway – the Hoshab to Gwadar portion of the motorway was completed and inaugurated in February 2016 by Prime Minister Nawaz Sharif.^[117] The Western Alignment will be flanked by special economic zones along its route,^[118] with at least seven special economic zones planned to be established in Khyber Pakhtunkhwa.^[100]

Other roadway projects associated with CPEC

Asian Development Bank funded projects

The 184 kilometre long M-4 Motorway between Faisalabad and Multan does not fall under the scope of CPEC projects, but is nevertheless considered vital to the CPEC transportation project. It will instead be financed by the Asian Development Bank and the Asian Infrastructure Investment Bank,^[97] and will be the first project jointly financed by those banks.^[119] Further funding comes from an additional $90.7 million grant announced in October 2015 by the government of the United Kingdom towards the construction of portion of the M4 Motorway project.^[120]

The Karakoram Highway south of the city of Mansehra will also be upgrade into a controlled-access highway to officially be known as the E-35 expressway. While it is considered to be a crucial part of the route between Gwadar and China, the E35 will not be financed by CPEC funds. The project will instead be financed by the Asian Development Bank^[121] with a $121.6 million grant from the United Kingdom towards the project.^[122] Once completed, the E35 Expressway, the M4 Motorway, and Karachi-Lahore Motorway will provide continuous high-speed road travel on controlled-access motorways from Mansehra to Karachi – 1,550 kilometres away.

Approximately halfway between Zhob and Quetta, the town of Qilla Saifullah in Balochistan lies at the intersection of the N50 National Highway and the N70 National Highway. The two roads form the 447 kilometre route between Quetta and Multan in southern Punjab. While the N70 project is not officially a part of CPEC, it will connect the CPEC's Western Alignment to the Karachi-Lahore Motorway at Multan. Reconstruction works on the 126 kilometre portion of the N70 between Qilla Saifullah and Wagum are slated for completion by 2018,^[123] and are financed as part of a $195 million package by the Asian Development Bank,^[113] and by a $72.4 million grant from the United Kingdom's Department for International Development.^[124]

Future Central Alignment

Long-term plans for a "Central Alignment" of the CPEC consist of a network of roads which will commence in Gwadar and travel upcountry via the cities of Basima, Khuzdar, Sukkur, Rajanpur, Layyah, Muzaffargarh, and terminating in Dera Ismail Khan, with onward connections to Karakoram Highway via the Brahma Bahtar–Yarik Motorway.^[125]

Railway projects

The CPEC project emphasises major upgrades to Pakistan's ageing railway system, including rebuilding of the entire Main Line 1 railway between Karachi and Peshawar by 2020;^[126] this single railway currently handles 70% of Pakistan Railways traffic.^[127] In addition to the Main Line 1 railway, upgrades and expansions are slated for the Main Line 2 railway, Main Line 3 railway. The CPEC plan also calls for completion of a rail link over the 4,693-meter high Khunjerab Pass. The railway will provide direct access for Chinese and East Asian goods to Pakistani seaports at Karachi and Gwadar by 2030.^[127]

Procurement of an initial 250 new passenger coaches, and reconstruction of 21 train stations are also planned as part of the first phase of the project – bringing the total investment in Pakistan's railway system to approximately $5 billion by the end of 2019.^[128] 180 of the coaches are to be built at the Pakistan Railways Carriage Factory near Islamabad,^[129] while the Government of Pakistan intends to procure an additional 800 coaches at a later date, with the intention of building 595 of those coaches in Pakistan.^[129]

Overhaul of Main Line 1 Railway

The CPEC "Early Harvest" plan includes a complete overhaul of the 1,687 kilometre long Main Line 1 railway (ML-1) between Karachi and Peshawar at a cost of $3.65 billion for the first phase of the project,^[66] with the first phase expected to be completed by December 2017.^[130] In June 2016, China and Pakistan unveiled plans for the second phase of the project, with a total cost of $8.2 billion for both phases of the project.^[131] The second phase of the ML-1 overhaul project is expected to be completed in 2021.^[131]

Upgrading of the railway line will permit train travel at speeds of 160 kilometres per hour, versus the average 60 to 105 km per hour speed currently possible on existing track,^[132] and is expected to increase Pakistan Railways' annual revenues by approximately $480 million.^[127][133] The upgrades are also expected to cut transit times from Karachi to Peshawar by half.^[134] Pakistani railways currently account for 4% of freight traffic in the country, and upon completion of CPEC, Pakistani railways are expected to transport 20% of the country's freight traffic by 2025.^[135]

The first part of the expedited first phase of the project will focus on upgrading the Multan to Peshawar section, which will then be followed by the Hyderabad to Multan section, and finally by the Hyderabad to Karachi section.^[136]

At the time of CPEC's announcement, the ML-1 consisted of mostly dual track railway between Karachi, and the Lahore suburb of Shahdara, with long stretches of single track. From Shahdara, the track mainly consisted of a single track until the city Peshawar. Construction works to dualize the entire track between Karachi to Shahdara were completed and inaugurated in January 2016.^[137] As part of the first phase of the CPEC railway project, the remaining stretch of track between Shahdara and Peshawar is to upgraded to a dual track railway.^[138]

The 676 kilometer portion between Lalamusa, north of Lahore, and Peshawar will require complete reconstruction with the addition of tunnels, culverts, and bridges, while over 900 kilometers south of Lalamusa towards Karachi will be upgraded to handle cars with a 25-ton axle load capacity.^[139] A spur from Taxila to Havelian will also be constructed, with a dry port to be established near the city of Havelian.^[140] Further, the entire length of track will have computerised signal systems, with stretches of track in urban areas to also be fenced off to prevent pedestrians and vehicles from crossing tracks in unauthorised areas.^[141]

Overhaul of Main Line 2 Railway

In addition to upgrading the ML-1, the CPEC project also calls for similar major upgrade on the 1,254 kilometre long Main Line 2 (ML-2) railway between Kotri in Sindh province, and Attock in northern Punjab province via the cities of Larkana and Dera Ghazi Khan.^[142] The route towards northern Pakistan roughly parallels the Indus River, as opposed to the ML-1 which takes a more eastward course towards Lahore. The project also includes a plan to connect Gwadar, to the town of Jacobabad, Sindh^[143] which lies at the intersection of the ML-2 and ML-3 railways.

Overhaul of Main Line 3 Railway

Medium term plans for the Main Line 3 (ML-3) railway line will also include construction of a 560 kilometre long railway line between Bostan near Quetta, to Kotla Jam near the city of Dera Ismail Khan,^[144] which will provide access to southern Afghanistan. The railway route will pass through the city of Quetta and Zhob before terminating in Kotla Jam, and is expected to be constructed by 2025.^[127]

Orange Line Metro

The $1.6 billion Orange Line of the Lahore Metro is under construction and is regarded as a commercial project under CPEC.^[145] Construction on the line has already begun, with planned completion by Winter 2017.^[146][147] The line will be 27.1-kilometre (16.8 mi) long, of which 25.4 kilometres (15.8 mi) will be elevated, with the remaining portion to be underground between Jain Mandir and Lakshmi Chowk.^[148] When complete, the project will have the capacity to transport 250,000 commuters per day, with plans to increase capacity to 500,000 commuters per day by 2025.^[149]

Khunjerab Railway

Longer term projects under CPEC also call for construction of the 682 kilometre long Khunjerab Railway line between the city of Havelian, to the Khunjerab Pass on the Chinese border,^[150] with extension to China's Lanxin Railway in Kashgar, Xinjiang. The railway will roughly parallel the Karakoram Highway, and is expected to be complete in 2030.^[127]

The cost of the entire project is estimated to be approximately $12 billion, and will require 5 years for completion. A 300 million rupee study to establish final feasibility of constructing the rail line between Havelian and the Chinese border is already underway.^[151] A preliminary feasibility study was completed in 2008 by the Austrian engineering firm TBAC.^[152]

Energy sector projects

Pakistan's current energy generating capacity is 24,830 MW,^[153] though the country currently faces energy shortfalls of over 4,500MW on a regular basis^[20] with routine power cuts of up to 5 hours per day,^[21] which has shed an estimated 2–2.5% off its annual GDP.^[21] Energy generation will be a major focus of the CPEC project, with approximately $33 billion expected to be invested in this sector.^[19] As part of the "Early Harvest" scheme of the CPEC, an estimated 10,400 MW of electricity are slated for generation by March 2018 as part of CPEC's "Early Harvest" projects.^[22]

The energy projects under CPEC will be constructed by private Independent Power Producers, rather than by the governments of either China or Pakistan.^[154] The Exim Bank of China will finance these private investments at 5–6% interest rates, while the government of Pakistan will be contractually obliged to purchase electricity from those firms at pre-negotiated rates.^[155]

Renewable-energy projects

China's Zonergy company will complete construction on the world's largest solar power plant – the 6,500 acre Quaid-e-Azam Solar Park near the city of Bahawalpur with an estimated capacity of 1000MW is expected to be completed in December 2016.^[156][157] The first phase of the project has been completed by Xinjiang SunOasis, and has a generating capacity of 100 MW.^[158] The remaining 900 MW capacity will be installed by Zonergy under CPEC.^[158]

The Jhimpir Wind Power Plant, built by the Turkish company Zorlu Enerji has already begun to sell 56.4 MW of electricity to the government of Pakistan,^[159] though under CPEC, another 250MW of electricity are to be produced by the Chinese-Pakistan consortium United Energy Pakistan and others at a cost of $659 million.^[160][161] Another wind farm, the Dawood wind power project is under development by HydroChina at a cost of $115 million, and will generate 50 MW of electricity by August 2016.^[162]

SK Hydro Consortium is constructing the 870 MW Suki Kinari Hydropower Project in the Kaghan Valley of Pakistan's Khyber Pakhtunkhwa province at a cost of $1.8 billion,^[163] SK Hydro will construct the project with financing by China's EXIM bank.^[164]

The $1.6 billion 720 MW Karot Dam which is under construction is part of the CPEC plan, but is to be financed separately by China's Silk Road Fund.^[165]

Pakistan and China have also discussed the inclusion of the 4,500MW $14 billion Diamer-Bhasha Dam as part of the CPEC project,^[166] though as of December 2015, no firm decision has been made – though Pakistani officials remain optimistic at its eventual inclusion.^[167]

The $2.4 billion, 1,100 MW Kohala Hydropower Project being constructed by China's Three Gorges Corporation predates the announcement of CPEC, though funding for the project will now come from CPEC fund.^[168]

Coal

Despite several renewable energy projects, the bulk of new energy generation capacity under CPEC will be coal-based plants, with $5.8 billion worth of coal power projects expected to be completed by early 2019 as part of the CPEC's "Early Harvest" projects.

Projects in Sindh

The Shanghai Electric company of China will construct two 660MW power plants as part of the "Thar-I" project in the Thar coalfield of Sindh province, while "Thar-ll" will be developed by a separate consortium.^[169][170] The facility will be powered by locally sourced coal,^[171] and is expected to be put into commercial use in 2018.^[172] Pakistan's National Electric Power Regulatory Authority (NEPRA) has agreed to purchase electricity from both Thar-l and Thar-ll at a tariff of 8.50 US cents/kWh for the first 330 MW of electricity, 8.33 US cents/kWh for the next 660 MW, and 7.99 US cents/kWh for the next 1,099 MW as further phases are developed.^[173][174]

Near the Thar-I Project, the China Machinery Engineering Corporation in conjunction with Pakistan's Engro Corporation will construct two 330MW power plants as part of the "Thar-ll Project" (having initially proposed the simultaneous construction of two 660MW power plants) as well as developing a coal mine capable of producing up to 3.8 million tons of coal per year as part of the first phase of the project."^[175] The first phase is expected to be complete by early 2019,^[176] at a cost of $1.95 billion.^[177] Subsequent phases will eventually generate an additional 3,960MW of electricity over the course of ten years.^[170] As part of infrastructure required for electricity distribution from the Thar l and ll Projects, the $2.1 billion Matiari to Lahore Transmission Line, and $1.5 billion in Matiari to Faisalabad transmission line are also to be built as part of the CPEC project.^[22]

The 1,320MW $2.08 billion Pakistan Port Qasim Power Project near Port Qasim will be a joint venture of Al-Mirqab Capital from Qatar, and China's Power Construction Corporation – a subsidiary of Sinohydro Resources Limited.^[178][179] Pakistan's NEPRA and SinoHydro agreed to set the levelized tariff for electricity purchased from the consortium at 8.12 US cents/kWh.^[180]

Projects in Punjab

The $1.8 billion Sahiwal Coal Power Project is an under construction project in central Punjab that will have a capacity of 1,320MW. It is being constructed by a joint venture of two Chinese firms: the Huaneng Shandong company and Shandong Ruyi Science & Technology Group, who will jointly own and operate the plant.^[181] Pakistan will purchase electricity from the consortium at a tariff of 8.36 US cents/kWh.^[182]

The $589 million project to establish a coal mine and a relatively small 300MW coal power plant to be built in the town of Pind Dadan Khan by China Machinery Engineering Corporation in Punjab's Salt Range.^[183] Pakistan's NEPRA has been criticized for considering a relatively high tariff of 11.57 US cents/kWH proposed by the Chinese firm,^[184] which had been initially agreed at 8.25 US cents/kWH in 2014.^[185] The Chinese firm argued that coal transportation costs had greatly increased due to the nonavailability of coal from nearby mines which had initially been regarded as the primary coal source for the project. The company argued that coal would instead have to be transported from distant Sindh province, which along with inefficiencies in mining procedures, increased the cost of fuel by 30.5%.^[186]

Projects in Balochistan

In Balochistan province, a $970 million coal power plant at Hub, near Karachi, with a capacity of 660MW to be built by a joint consortium of China's China Power Investment Corporation and the Pakistani firm Hub Power Company as part of a larger $2 billion project to produce 1,320MW from coal.^[187]

A 300MW coal power plant is also being developed in the city of Gwadar, and is being financed by a 0% interest loan.^[63]

Liquified natural gas

Liquefied natural gas power LNG projects are also considered vital to CPEC. The Chinese government has announced its intention to build a $2.5 billion 711 kilometre long liquid natural gas pipeline from Gwadar to Nawabshah in province as part of CPEC.^[188] The pipeline is designed to be a part of the 2,775 kilometre long Iran–Pakistan gas pipeline, with the 80 kilometre portion between Gwadar and the Iranian border to be connected when sanctions against Tehran are eased; Iran has already completed a 900 kilometre long portion of the pipeline on its side of the border.^[18]

The Pakistani portion of the pipeline is to be constructed by the state-owned China Petroleum Pipelines Bureau.^[189] It will be 42 inches in diameter, and have the capacity to transport 1 billion cubic feet of liquified natural gas every day, with an additional 500 million cubic feet of additional capacity when the planned off-shore LNG terminal is also completed^[190] The project will not only provide gas exporters with access to the Pakistani market, but will also allow China to secure a route for its own imports.^[191]

The project should not be confused with the $2 billion 1,100 kilometre North-South Pipeline liquified natural gas pipeline which is to be constructed with Russian assistance between Karachi and Lahore with anticipated completion by 2018.^[192] Nor should it be confused with the planned $7.5 billion TAPI Pipeline which is a planned project involving Turkmenistan, Afghanistan, Pakistan, and India.

Other LNG projects are currently under construction with Chinese assistance and financing that will augment the scope of CPEC, but are neither funded by nor officially considered a part of CPEC. The 1,223MW Balloki Power Plant is currently under construction near Kasur, and is being constructed by China's Harbin Electric Company with financing from the China's EXIM bank, is one such example. In October 2015, Prime Minister Nawaz Sharif also inaugurated construction of the 1,180MW Bhikhi Power Plant near Sheikhupura,^[193] which is to be jointly constructed by China's Harbin Electric Company and General Electric from the United States.^[194] It is expected to be Pakistan's most efficient power plant, and will provide enough power for an estimated 6 million homes.^[194]

"Early Harvest" energy projects

As part of the "Early Harvest" scheme of the CPEC, over 10,000 megawatts of electricity-generating capacity is to be developed between 2018 and 2020.^[22] While some "Early Harvest" projects will not be complete until 2020, the government of Pakistan plans to add approximately 10,000 MW of energy-generating capacity to Pakistan's electric grid by 2018 through the completion of projects which complement CPEC. Although not officially under the scope of CPEC, the 1,223 MW Balloki power plant, and the 1,180 MW Bhakki powerplants are also under construction,^[193][195] which along with the under-construction 969 MW Neelum–Jhelum Hydropower Plant and 1,410 MW Tarbela IV Extension Project will result in an additional 10,000 MW being added to Pakistan's electricity grid by 2018 by a combination of CPEC and non-CPEC projects.^[196] A further 1,000 MW of electricity will be imported to Pakistan from Tajikistan and Kyrgyzstan as part of the CASA-1000 project, which is expected to be completed in late 2018.^[197]

Table of projects

"Early Harvest" Energy Project[198]	Capacity	Location
Pakistan Port Qasim Power Project.	1,320 MW (2 x 660 MW plants)	Sindh
Thar-l Project	1,320 MW (4 x 330 MW plants)	Sindh
Thar-ll Project and coal mine	1,320 MW (2 x 660 MW plants)	Sindh
Sahiwal Coal Power Project	1,320 MW (2 x 660 MW plants)	Punjab
Rahimyar Khan coal power project	1,320 MW (2 x 660 MW plants)	Punjab
Quaid-e-Azam Solar Park	1,000 MW	Punjab
Suki Kinari Hydropower Project	870 MW (expected completion in 2020)[199]	Khyber Pakhtunkhwa
Karot Hydropower Project	720 MW (expected completion in 2020)[200]	Punjab
China Power Hub Generation Company	2X660 MW	Balochistan
Thar Engro Coal Power Project	660 MW (2 x 330 MW plants)	Sindh
Gwadar coal power project	300 MW	Balochistan
UEP Windfarm	100 MW	Sindh
Dawood wind power project	50 MW	Sindh
Sachal Windfarm	50 MW	Sindh
Sunnec Windfarm	50 MW	Sindh
Matiari to Faisalabad transmission line	660 kilovolt	Sindh and Punjab
Matiari to Lahore Transmission Line	660 kilovolt	Sindh and Punjab

Other areas of cooperation

The CPEC announcement encompassed not only infrastructure works, but also addressed areas of co-operation between China and Pakistan.

Agriculture

The long-term plan for the period 2025-30 during the CPEC summit held in Islamabad on August 30, 2016. The plan includes coperation over livelihood, water resources, livestock, people-to-people communications and financial matters. Under the plan, agricultural information project, storage and distribution of agricultural equipment and construction project, agricultural mechanisation, demonstration and machinery leasing project and fertiliser production project for producing 800,000 tons of fertiliser and 100,000 tons of bio-organic fertiliser will be implemented.^[201][202]

Science and technology cooperation

As part of CPEC, the two countries signed an Economic and Technical Cooperation Agreement,^[203] as well as pledged to "China-Pakistan Joint Cotton Bio-Tech Laboratory"^[203] The two countries also pledged to establish the "China-Pakistan Joint Marine Research Center" with State Oceanic Administration and Pakistan's Ministry of Science and Technology^[203] Also as part of the CPEC agreement, Pakistan and China have agreed to co-operate in the field of space research.^[204]

In February 2016, the two countries agreed to establish the "Pak-China Science, Technology, Commerce and Logistic Park" near Islamabad at an estimated cost of $1.5 billion.^[205] The park will be situated on 500 hectares, which will be provided by Pakistan to China's Xinjiang Production and Construction Corps, with all investments expected to come from the Chinese side over the course of ten years.^[206]

In May 2016, construction began on the $44 million 820 kilometer long Pakistan-China Fiber Optic Project, an optical fiber cable that will enhance telecommunication in the Gilgit-Baltistan region, while offering Pakistan a fifth route by which to transmit telecommunication traffic.^[207]

Government-to-government cooperation

The two nations also pledged co-operation in field ranging from anti-narcotic efforts,^[203] to co-operation in an effort to reduce climate change.^[203] The two nations also agreed to increase co-operating between the banking sectors of the two countries, as well as to establish closer ties between China Central Television and the Pakistan Television Corporation.^[203]

Project financing

Loans to the Pakistani Government

Approximately $11 billion worth of infrastructure projects being developed by the Pakistani government will be financed by concessionary loans, with composite interest rates of 1.6%,^[208] after Pakistan successfully lobbied the Chinese government to reduce interest rates from an initial 3%.^[209] The loans are subsidised by the government of China, and are to be dispersed by the Exim Bank of China and the China Development Bank. For comparison, loans for previous Pakistani infrastructure projects financed by the World Bank carried an interest rate between 5% and 8.5%,^[210] while interest rates on market loans approach 12%.^[211]

The loan money would be used to finance projects which are planned and executed by the Pakistani government. Portions of the approximately $6.6 billion^[85] Karachi–Lahore Motorway are already under construction.^[212] The $2.9 billion phase which will connect the city of Multan to the city of Sukkur over a distance of 392 kilometres has also been approved,^[213] with 90% of costs to be financed by the Chinese government at concessionary interest rates, while the remaining 10% is to be financed by the Public Sector Development Programme of the Pakistani government.^[214] In May 2016, the $2.9 billion loan were given final approvals required prior to disbursement of the funds were given by the Government of the People's Republic of China on May 4, 2016, and will be concessionary loans with an interest rate of 2.0%.^[74] The National Highway Authority of Pakistan reported that contractors arrived on site soon after the loan received final approval.^[74]

The China Development Bank will finance the $920 million towards the cost of reconstruction of the 487 kilometer portion of the Karakoram Highway between Burhan and Raikot.^[215][216] An addition $1.26 billion will be lent by the China Exim Bank for the construction of the Havelian to Thakot portion of this 487 kilometer stretch of roadway,^[72][217] to be dispersed as low-interest rate concessionary loans.^[74]

$7 billion of the planned $8.2 billion overhaul of the Main Line 1 railway is to be financed by concessionary loans, which extended by China's state owned banks.^[218]

The long-planned 27.1 km long $1.6 billion Orange Line of the Lahore Metro is regarded as a commercial project,^[203] and does not qualify for the Exim Bank's 1.6% interest rate. It will instead by financed at a 2.4% interest rate^[146] after China agreed to reduce interest rates from an originally planned rate of 3.4%.^[219]

The $44 million Pakistan-China Fiber Optic Project, a 820 km long fibre optic wire connecting Pakistan and China, will be constructed using concessionary loans at an interest rate of 2%, rather than the 1.6% rate applied to other projects.^[220]

Interest-free loans for Gwadar projects

The government of China in August 2015 announced that concessionary loans for several projects in Gwadar totalling $757 million would be converted 0% interest loans.^[221] The projects which are now to financed by the 0% interest loans include: the construction of the $140 million East Bay Expressway project, installation of breakwaters in Gwadar which will cost $130 million, a $360 million coal power plant in Gwadar, a $27 million project to dredge berths in Gwadar harbour, and a $100 million 300-bed hospital in Gwadar.^[222] Pakistan will only repay the principle on these loans.

In September 2015, the government of China also announced that the $230 million Gwadar International Airport project would no longer be financed by loans, but would instead be constructed by grants which the government of Pakistan will not be required to repay.^[209]

Loans to private consortia

$15.5 billion worth of energy projects are to be constructed by joint Chinese-Pakistani firms, rather than by the governments of either China or Pakistan. The Exim Bank of China will finance those investments at 5–6% interest rates, while the government of Pakistan will be contractually obliged to purchase electricity from those firms at pre-negotiated rates.^[155]

As an example, the 1,223MW Balloki Power Plant does not fall under the concessionary loan rate of 1.6%, as the project is not being developed by the Pakistani government. Instead, it is considered to be a private sector investment as its construction will be undertaken by a consortium of Harbin Electric and Habib Rafiq Limited after they successfully bid against international competitors.^[223] Chinese state-owned banks will provide loans to the consortium that are subsidised by the Chinese government. In the case of the Balloki Power Plant, state-owned banks will finance the project at an interest rate of 5%,^[224] while the Pakistani government will purchase electricity at the lowest bid rate of 7.973 cents per unit.^[223]

Asian Development Bank assistance

While the E-35 expressway is considered to be a crucial part of the route between Gwadar and China, the E35 will not be financed by CPEC funds. The project will instead be financed by the Asian Development Bank.^[121]

The N70 project is not officially a part of CPEC but will connect the CPEC's Western Alignment to the Karachi-Lahore Motorway at Multan. The project will be financed as part of a $195 million package by the Asian Development Bank announced in May 2015 to upgrade the N70 National Highway and N50 National Highway.^[113] In January 2016, The United Kingdom's Department for International Development announced a $72.4 million grant to Pakistan for roadway improvements in the province of Balochistan, thereby reducing the total Asian Development Bank loan from $195 million to $122.6 million.^[225]

The M-4 Motorway between Faisalabad and Multan is not to be financed by the Chinese government as part of CPEC, but will instead be the first infrastructure project partially financed by the Asian Infrastructure Investment Bank, and will be co-financed along with the Asian Development Bank for a total of approximately $275 million.^[97] Portions of the project will also be funded by a $90.7 million grant announced in October 2015 by the government of the United Kingdom towards the construction of the Gojra-Shorkot section of the M4 Motorway project.^[120]

Geostrategic impact

A stimulus for economic growth in Pakistan

“	[CPEC] will be a strategic gamechanger in the region, which would go a long way in making Pakistan a richer and stronger entity than ever before.	”
— Firstpost (India) April 22, 2015[226]

CPEC is considered economically vital to Pakistan in helping it drive economic growth.^[227] The Pakistani media and government have called CPEC investments a "game and fate changer" for the region,^[228][229] while both China and Pakistan intend that the massive investment plan will transform Pakistan into a regional economic hub and further boost the deepening ties between the two countries.^[230] Approximately 1 year after the announcement of CPEC, Zhang Baozhong, chairman of China Overseas Port Holding Company told The Washington Post that his company planned to spend an additional $4.5 billion on roads, power, hotels and other infrastructure for Gwadar's industrial zone,^[8] which would be one of the largest ever sums of foreign direct investment into Pakistan.

Pakistan currently faces energy shortfalls of over 4,500MW on a regular basis^[20] with routine power cuts of up to 12 hours per day,^[21] which has shed an estimated 2-2.5% off its annual GDP.^[21] The Financial Times notes that Pakistan's electricity shortages are a major hindrance to foreign investment, and that Chinese investments in Pakistani infrastructure and power projects will lead to a "virtuous cycle" that will make the country more attractive for foreign investment in a variety of sectors.^[231] Poor availability of electricity is considered by the World Bank to be a main constraint to both economic growth and investment in Pakistan.^[232]

Pakistan's large textile industry has also been negatively effected by several-hour long power cuts, with almost 20% of textile factories in the city of Faisalabad shutting down on account of power shortages.^[233] The CPEC's "Early Harvest" projects are expected to resolve shortages in power generation by 2018 by increasing Pakistan's power generation capacity by over 10,000 megawatts.^[22] As a result of improved infrastructure and energy supplies, the Pakistani government expects that economic growth rates will reach 7% by 2018.^[234]

Former Pakistan Prime Minister Shaukat Aziz also stated in May 2016 that predicted economic growth from CPEC projects would result in stabilization of Pakistan's security situation,^[235] which has also been cited by the World Bank as hindrance to sustained economic growth in Pakistan.^[236]

According to Chinese Foreign Ministry Spokesperson Hua Chunying, the corridor will "serve as a driver for connectivity between South Asia and East Asia." Mushahid Hussain, chairman of the Pakistan-China Institute, told China Daily that the economic corridor "will play a crucial role in regional integration of the 'Greater South Asia', which includes China, Iran, Afghanistan, and stretches all the way to Myanmar."^[31] When fully built, the corridor is expected to generate significant revenue from transit fees levied on Chinese goods – to the tune of several billion dollars per annum.^[237] According to The Guardian, "The Chinese are not just offering to build much-needed infrastructure but also make Pakistan a key partner in its grand economic and strategic ambitions."^[238]

Moody's Investors Service has described the project as a "credit positive" for Pakistan. In 2015, the agency acknowledged that much of the project's key benefits would not materialise until 2017, but stated that it believes at least some of the benefits from the economic corridor would likely begin accruing even before then.^[239] The Asian Development Bank stated "CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets."^[240]

On November 14, 2016, Hyatt Hotels Corporation announced plan's to open four properties in Pakistan, in partnership with Bahria Town Group, citing the investment of CPEC as the reason behind the $600 million investment.^[241]

CPEC to circumvent the Straits of Malacca

The Straits of Malacca provide China with its shortest maritime access to Europe, Africa, and the Middle East.^[242] Approximately 80% pass of its Middle Eastern energy imports also pass through the Straits of Malacca.^[243] As the world's biggest oil importer,^[34] energy security is a key concern for China while current sea routes used to import Middle Eastern oil are frequently patrolled by the United States' Navy.^[244]

In the event that China were to face hostile actions from a state or non-state actor, energy imports through the Straits of Malacca could be halted, which in turn would paralyse the Chinese economy in a scenario that is frequently referred to as the "Malacca Dilemma."^[243] In addition to vulnerabilities faced in the Straits of Malacca region, China is heavily dependent upon sea-routes that pass through the South China Sea, near the disputed Spratly Islands and Paracel Islands, which are currently a source of tension between China, Taiwan, Vietnam, the Philippines, and the United States.^[245] The CPEC project will allow Chinese energy imports to circumvent these contentious areas and find a new artery in the west, and thereby decrease the possibility of confrontation between the United States and China.^[246]

In addition to potential weaknesses in regards to the United States' Navy, the Indian Navy has recently increased maritime surveillance of the Straits of Malacca region from its base on Great Nicobar Island.^[247] India has expressed fears of a Chinese "String of Pearls" encircling it.^[248][249] Were conflict to erupt, India could potentially impede Chinese imports through the straits.^[250] Indian maritime surveillance in the Andaman Sea could possibly enhance Chinese interest in Pakistan's Gwadar Port – the Kyaukpyu Port, which is currently being developed in Myanmar by the Chinese government as another alternate route around the Straits of Malacca, will likely be vulnerable to similar advances by the Indian Navy. The proposed Bangladesh-China-India-Myanmar Corridor (BCIM) would also be vulnerable to Indian advances against China in the event of conflict, thereby potentially limiting the BCIM Corridor's usefulness to China's energy security, and thereby increasing Chinese interest in CPEC.

Improved access to western China

The CPEC Alignments will improve connectivity to restive Xinjiang, thereby increasing the region's potential to attract public and private investment.^[242] CPEC is considered central to China–Pakistan relations; its central importance is reflected by China's inclusion of the project as part of its 13th five-year development plan.^[252][253] The CPEC projects will also complement China's Western Development plan, which includes not only Xinjiang, but also the neighbouring regions of Tibet and Qinghai.^[254]

In addition to its significance to reduce Chinese dependence on the Sea of Malacca and South China Sea routes, CPEC will provide China an alternative and shorter route for energy imports from the Middle East, thereby reducing shipping costs and transit times. The currently available sea-route to China is roughly 12,000 kilometres long, while the distance from Gwadar Port to Xinjiang province is approximately 3,000 kilometres, with another 3,500 kilometres from Xinjiang to China's eastern coast.^[243] As a result of CPEC, Chinese imports and exports to the Middle East, Africa, and Europe would require much shorter shipment times and distances.

A route to circumvent Afghanistan

Negotiations to provide an alternate route to the Central Asian republics by way of China predate the announcement of CPEC. The Afghanistan–Pakistan Transit Trade Agreement of 2010 provided Pakistan access to Central Asia via Afghanistan, however, the full agreement has yet to be fully implemented. The "Quadrilateral Agreement on Traffic in Transit" (QATT) was first devised in 1995, and signed in 2004 by the governments of China, Pakistan, Kazakhstan, and Kyrgyzstan to facilitate transit trade between the various countries, with no inclusion of Afghanistan.^[255] Despite signing of the QATT, the agreements full potential was never realised, largely on account of poor infrastructure links between the four countries prior to the announcement of CPEC.

During the visit of Afghan President Ashraf Ghani to India in April 2015, he stated "We will not provide equal transit access to Central Asia for Pakistani trucks" unless the Pakistani government included India as part of the 2010 Afghanistan–Pakistan Transit Trade Agreement.^[256] The Transit Trade Agreement provides Afghanistan access to the Port of Karachi to conduct export trade with India, and allows Afghan goods to be transited up to any border of Pakistan, but does not guarantee Afghan trucks the right to traverse the Wagah Border, nor does the agreement permit Indian goods to be exported to Afghanistan via Pakistan.^[257] Owing to continued tensions between India and Pakistan, the Pakistani government expressed reluctance to include India in any trade negotiations with Afghanistan, and as a result, little progress was made between the Afghan and Pakistani sides.

In February 2016, the Pakistani government signalled its intention to completely bypass Afghanistan in its quest to access Central Asia by announcing its intent to revive the QATT so that Central Asian states could access Pakistani ports via Kashgar instead of Afghanistan,^[258] thereby allowing the Central Asian republics to access Pakistan's deep water ports without having to rely on a politically unstable Afghanistan as a transit corridor. In early March 2016, the Afghan government reportedly acquiesced to Pakistani requests to use Afghanistan as a corridor to Tajikistan, after having dropped demands from reciprocal access to India via Pakistan.^[259]

A new corridor to the Central Asian Republics

The heads of various Central Asian republics have expressed their desire to connect their infrastructure networks to the CPEC project via China. During the August 2015 visit of Pakistani Prime Minister Nawaz Sharif to Kazakhstan, the Kazakh Prime Minister Karim Massimov, conveyed Kazakhstan's desire to link its road network to the CPEC project.^[260] During the November 2015 visit of Tajikistan President Emomali Rahmon to Pakistan, the Tajik premier also expressed his government's desire to join the Quadrilateral Agreement on Traffic in Transit to use CPEC as a conduit for imports and exports to Tajikistan by circumventing Afghanistan;^[261] the request received political backing by the Pakistani Prime Minister.^[261]

With the advent of CPEC-related infrastructure projects, transit times between Kashgar and Pakistan's coast will be greatly reduced, which in turn will also reduce transit times to the Kyrgyzstan and hydrocarbon-rich Kazakhstan through already existing overland routes. The Chinese government has already upgraded the road linking Kashgar to Osh in Kyrgyzstan via the Kyrgyz town of Erkeshtam while a railway between Urumqi, China and Almaty, Kazakhstan has also been completed as part of China's One Belt One Road initiative.^[262] Numerous land crossings already exist between Kazakhstan and China as well. Additionally, the Chinese government has announced plans to lay railway track from Tashkent, Uzbekistan, towards Kyrgyzstan with onwards connections to China and Pakistan.^[263] Further, the Pamir Highway already provides Tajikistan access to Kashgar via the Kulma Pass. These crossings complement the CPEC project to provide Central Asian states access to Pakistan's deepwater ports by completely bypassing Afghanistan – a country which has been ravaged by civil war and political instability since the late 1970s.

Comparison to Chabahar Port

In May 2016, Indian Prime Minister Narendra Modi and his counterpart, Iranian President Hassan Rouhani, signed a series of twelve agreements in Tehran, in which India offered to refurbish one of Chabahar's ten existing berths, and reconstruct another berth the Port of Chabahar,^[264] in order to allow Indian goods to be exported to Iran, with the possibility of onward connections to Afghanistan and Central Asia.^[265] A section of the Indian media described it as "a counter to the China-Pakistan Economic Corridor,"^[266] although the total monetary value of projects has been noted to be significantly less than that of CPEC.^[267]

As part of the twelve memorandums of understanding signed by Indian and Iranian delegations as per text released by India's Ministry of External Affairs, India will offer a $150 million line of credit extended by the Exim Bank of India,^[268] while India Ports Global also signed a contract with Iran's Aria Banader to develop berths at the port,^[269] at a cost of $85 million ^[270] over the course of 18 months.^[271]

Under the agreement, India Ports Global will refurbish a 640 meter long container handling facility, and reconstruct a 600 meter long berth at the port.^[264] India further agreed to extend a $400 million line of credit to be used for the import of steel for the construction of a rail link between Chabahar and Zahedan,^[272] while India's IRCON and Iran's Construction, Development of Transport and Infrastructure Company signed a memorandum of understanding regarding the construction and finance of the Chabahar to Zahedan rail line at a cost of $1.6 billion.^[273]

India's Highways and Shipping Minister, Nitin Gadkari suggested that the free trade zone in Chabahar had the potential to attract upwards of $15 billion worth of investment in the future,^[274] although he stated that such investments are predicated upon Iran offering India natural gas at a rate of $1.50 per million British Thermal Units,^[275] which is substantially lower than the rate of $2.95 per million British Thermal Units offered by Iran.^[276] The two countries also signed a memorandum of understanding to explore the possibility of setting up an aluminum smelter at a cost of $2 billion,^[277] as well as establishing a urea processing facility in Chahbahar,^[278] although these investments are also contingent upon Iran supplying low-cost natural gas for operation of those facilities.^[279]

India, Iran, and Afghanistan also signed an agreement with the intention of simplifying transit procedures between the three countries.^[270] Despite the expressed desire to circumvent Pakistan in order to augment Iranian and Indian economic ties, Indian goods destined for Iran currently do not require transit through Pakistan, as those goods can be exported to Iran via Bandar Abbas, where India also currently maintains a diplomatic mission.^[280] Bandar Abbas is also consider a key node on the North–South Transport Corridor, backed by India and Russia since 2002.^[281][282] Indian goods also can be imported and transited across Iran upon arrival at Bandar-e Emam Khomeyni near the Iraqi border.

As per the Afghanistan–Pakistan Transit Trade Agreement, Afghan goods can be transited across Pakistan for export to India as well, though Indian goods cannot be exported to Afghanistan via Pakistan.^[283] Upon completion of Chabahar, Indian exporters will benefit from the potential ability to export goods to Afghanistan, a country with an annual gross domestic product estimated at $60.6 billion.^[284] While agreements have specifically cited improvements for Afghan connectivity to the world as a benefit of Indian investment in the region,^[285]

After signing the agreement, Iran's ambassador to Pakistan, Mehdi Honerdoost, stated that the agreement was "not finished," and that Iran would welcome the inclusion of both Pakistan and China in the project.^[286] While clarifying that Chabahar Port would not be a rival or enemy to Pakistan's Gwadar Port,^[287] he further stated that Pakistan and China had both been invited to contribute to the project before India, but neither China nor Pakistan had expressed interest in joining.^[288][289]

Security issues

Afghanistan's politically instability could limit the potential usefulness of transit corridors to population centers near Kabul or Kandahar,^[290] as those routes traverse southern and eastern Afghanistan, where the Taliban is most active.^[291] The Chabahar plan relies upon connections to the Afghan Ring Road.^[292] By August 2016, the Taliban was noted to have captured large swathes of land in Helmand Province, and threatened to capture the provincial capital of Lashkar Gah,^[293] which lies on the portion of the Afghan Ring Road connecting Chabahar to Kandahar and Kabul. As a result, portions of the Afghan Ring Road were closed due to Taliban insurgent activity.^[294] Also in August 2016, the Taliban claimed responsibility for an attack which left twelve foreign tourists dead as they were traveling on an alternative route to the Afghan Ring Road, between Kabul and Herat.^[295] In September 2016, Iran's president Hassan Rouhani expressed his country's interest in joining CPEC during a meeting with Nawaz Sharif.^[296]

Security

China has expressed concern that some separatist groups in Xinjiang may be collaborating with insurgents in Pakistan, and has expressed a desire to strengthen security ties.^[34][297] The outlawed terrorist organisation Tehrik-i-Taliban has claimed responsibility for past attacks on some Chinese nationals,^[298] and Chinese commentators have raised concerns that construction workers could be kidnapped and ransomed.^[299] The Express Tribune reports that Pakistan plans to train 12,000 security personnel to protect Chinese workers on the corridor.^{[300][301][302]} Presently, 8,000 Pakistani security officials are deployed for the protection of over 8,100 Chinese workers in Pakistan.^[303]

Other terrorist organisations operate in Balochistan, including the Balochistan Liberation Army and Jundallah, which have carried out attacks in the province,^[304] and are allegedly backed by India.^[305] Exiled Baloch nationalist Hyrbyair Marri in an interview with Indian news stated that the safety of Chinese nationals working on the project could not be guaranteed.^[306]

CPEC passes though the disputed region of Kashmir where Indian and Pakistani border guards have occasionally exchanged fire across the Line of Control,^[307][308] although no CPEC project is located near the Line of Control. Chinese intelligence agencies reportedly also shared information with Pakistani authorities regarding alleged efforts by the India's Research and Analysis Wing to subvert the project.^[309][309]

In August 2016, Quetta, which lies on the Western Alignment of CPEC was struck by a suicide bombing which killed 70 people.^[310]

Controversy and miscellaneous issues

Allegations by KPK provincial assembly

Some planning aspects and technicalities associated with the route have been criticised in political forums and by the media.The Provincial Assembly of Khyber Pakhtunkhwa province adopted a resolution against the alleged decision of the central government to change the multibillion route of the proposed project by diverting it away from Khyber Pakhtunkhwa province.^[311] The supposed change in CPEC routing was first highlighted by journalist Farman Nawaz (editor Border Times Pakistan) in an article published in July 2013 by China's Global Times newspaper,^[312] two years before the official announcement of CPEC when levels of violence were much higher in that province, which he acknowledged could factor into any decision to re-route the corridor from KPK.^[312]

The federal Minister of Planning Development and Reform Ahsan Iqbal formally denied any change in the alignment.^{[33][313][314]} As a rebuttal to this argument, Wu Zhaoli, an assistant research fellow at the National Institute of International Strategy, Chinese Academy of Social Sciences, in his article also published in Global Times, stated that "security concerns are a critical cause which helps to determine the path of this corridor",^[299] implying that security concerns, rather than political bias, would be responsible for any route changes. According to Dr Ahmad Rashid Malik, Senior Research Fellow at the Institute of Strategic Studies Islamabad (ISSi), the route controversy is "baseless and an unfounded reality...".^[315]

As a result of frequent objections to CPEC conveyed by the government of Khyber Pakhtunkhwa province, the Chinese government in 2015 issued a statement urging Pakistani political parties to end their differences over the project.^[316]

Controversy over finances

In addition to the aforementioned issues, some sources have inappropriately suggested that the interest rate for CPEC related loans would be high, with India's Daily News and Analysis paper suggesting that Pakistan had unwittingly accepted loans that would "be offered at very high rates of interest,"^[317] although the actual interest rates were negotiated prior to acceptance, and for most projects will be 1.6%.^[318] Several articles in Pakistan have criticised the project's finances as being shrouded in mystery, while one article suggested that "there is far too much secrecy and far too little transparency."^[319] The Private Power and Infrastructure Board has also been accused of irregularities in the approval process for coal power plants and the tariffs at which Pakistan is contractually obliged to purchase electricity from those plants,^[320] with special concern regarding potential irregularities in the tariff approved for the 300MW coal power plant to be built in Pind Dadan Khan by China Machinery Engineering Corporation.^[321]

Opposition from Baloch nationalists

Some Baloch nationalists have opposed the large-scale development projects envisioned by CPEC, fearing that such developments in the province would eventually result in local residents "losing control" over natural resources.^[322] Others have alleged that CPEC is a "conspiracy" meant to stimulate the settlement of migrants from other regions of Pakistan in order to render ethnic Baloch a minority in the province.^[323]

In reference to the Pakistani Government's announcement of its intent to issue resident cards to the city's inhabitants as a security measure to prevent the movement of firearms into the city,^[324] former Chief Minister of Balochistan province, Akhtar Mengal, suggested at a political rally in November 2015, that execution of CPEC projects and the resident card policy would eventually result in ethnic Baloch being denied entry into the city.^[325] The resident cards measure would require any non-resident visitor to the city to register at designated security checkpoints prior to entering the city by road,^[324] without any reference to ethnicity. The former Chief Minister did, however, clarify that he would not oppose development projects in the province that he believed would uplift the plight of local residents.^[326] Shortly thereafter, the Pakistani government announced its intention to establish a training institute named Pak-China Technical and Vocational Institute at Gwadar which is to be completed at the cost of 943 million rupees to impart skills to local residents to train them to operate machinery at the port.^[28]

Concerns expressed by Gwadar residents

While nationalists openly oppose CPEC, some local leaders and residents of Gwadar city have also expressed concern in regards to the project – the head of Gwadar's local fisherman association stated in an interview with NBC News that "Development is good, China is our great friend, this CPEC thing sounds amazing, but don't forget that this is our land, first."^[327] Other residents doubt they will see any of the benefits promised by CPEC, while others fear they will be evicted from their homes in order to make way for infrastructure works.^[328]

In response to concerns of local residents, Lt. General Amer Riaz who heads security operations in the province, stated that locals would not be deprived of benefits, and that local Gwadar residents would have "the first right to everything."^[329] Pakistan's Minister of Planning, National Reforms, and Development, Ahsan Iqbal, further stated in May 2016 that Gwadar residents would be regarded as "main stakeholders" in the city's master plan, and that fishermen specifically would also be accommodated by the plan.^[330] The developer of Gwadar Port, COPHC, has also announced that it will assist Gwadar's fishermen to help boost the region's seafood industry by developing programs to improve the quality of local seafoods.^[331]

Indian objections to CPEC

The Government of India, which shares tense relations with Pakistan, regards portions of the CPEC project negatively as they pass through the Pakistani-administered side of Kashmir; territory that India disputes. Former Indian ambassador, Phunchok Stobdan, alleged that China and Pakistan intended to develop the corridor not just for its economic benefits, but also is motivated by the "strategic intent of besieging India," though he also stated that India can do little to scuttle CPEC, and that avoiding China's One Road One Belt project altogether would be to the detriment of India.^[332]

During the visit of Indian Prime Minister Narendra Modi to China in 2015, the Indian Foreign Minister, Sushma Swaraj reportedly told Chinese Premier Xi Jinping that projects passing through Gilgit-Baltistan are "unacceptable" as they require construction in the claimed territory.^[333][334] India's Foreign Secretary Subrahmanyam Jaishankar also confirmed that the issue had been raised with the Chinese government on the trip.^[335] Swaraj reiterated this stance during a meeting in August 2016 with Chinese foreign minister Wang Yi, stating India would "resolutely oppose" the corridor in Kashmir.^[336]

The Indian Ministry of External Affairs in May 2015 also summoned the Chinese envoy in New Delhi to lodge India's opposition to the project.^[337] The Chinese Premier dismissed the concerns, describing CPEC as a "commercial project"^[338] that would not target any third party.^[339]

In March 2016, Indian Foreign Secretary Subrahmanyam Jaishankar, in reference to China's ambitious One Road One Belt project and CPEC, stated that India's vision of Asian connectivity was that of a consultative process rather than that of "unilateral decisions," and that they should not "add to regional tensions."^[340]

In May 2016, India's Minister of State and External Affairs, Vijay Kumar Singh, stated that while India had raised its concerns regarding CPEC, that it was still awaiting a response from China.^[341] Despite Indian objections, China and Pakistan initiated works on the $44 million Pakistan-China Fiber Optic Project on May 19, 2016 which will require passage through Gilgit-Baltistan; the same region for which India expressed concerns to China.^[342] Former Indian National Security Advisor M. K. Narayanan also in May 2016 stated "CPEC must be viewed as a major threat. Both countries [China and Pakistan] have a common intention to undermine India`s position in the region."^[341]

Despite objections, segments of the Indian public, as exemplified by former Indian Ambassador Melkulangara Bhadrakumar, regard the project as in India's interest vis-à-vis Central Asia, and warn that India might "lose heavily" were India to remain opposed and isolated from the project.^[343]

On August 28, the China Institutes of Contemporary International Relations suggested that China will have “to get involved” if any Indian “plot” disrupts the $46 billion China–Pakistan Economic Corridor (CPEC) in restive Balochistan.^[344] Indian National Congress leader Manish Tewari said that if ultimately the CPEC is going to threaten India, then Modi needs to stand up to it.^[345]

Allegations of Indian subversion against CPEC

In March 2016, Pakistan announced that it had arrested a suspected spy from India's Research and Analysis Wing, Kulbhushan Yadav, who Pakistan accused of entering Pakistan from Iran specifically to destabilize regions in Pakistan's Balochistan province in order to hinder implementation of CPEC projects.^[346] Pakistan's Chief of Army Staff General Raheel Sharif in April 2016 accused India's Research and Analysis Wing of destabilizing Pakistan in an attempt to disrupt and stymie implementation of various CPEC projects.^[347] Pakistan's Secretary of Defense Lieutenant General Alam Khattak stated in April 2016 that the arrest of Kulbhushan Yadav indicated Indian interference in CPEC, and further alleged that India's Research and Analysis Wing, in collusion with Afghanistan's National Directorate of Security, had set up a dedicated espionage unit with express intent to sabotage CPEC.^[348]

List of major projects

Project	Notes
Gwadar Port	fully operational[349]
Gwadar-Ratodero Motorway	fully operational[350]
Dawood wind power project	Under construction.[351]
E-35 Expressway (Hazara Motorway)	Under construction[203] Funded by the Asian Development Bank,[352] but is considered vital to the Karakoram Highway Reconstruction project.
Iran–Pakistan gas pipeline	Under construction. Iranian portion completed.[203] Gwadar to Nawabshah portion is to be funded by CPEC agreements, while the Gwadar – Iran border portion will be funded by the Pakistani government.
Reconstruction of the Karakoram Highway	Under construction. Portion between Raikot and Chinese border had been under construction prior to CPEC announcement, and was completed in 2012.[78] The 24 kilometre long Karakorum Highway Realignment around Attabad Lake was also completed in 2015.[353]
Karachi–Lahore Motorway Multan to Sukkur segment	The 136 kilometer long Karachi to Hyderabad portion, the 392 kilometer long Sukkur to Multan portion, and the 230 kilometer long Abdul Hakeem to Lahore portions of the Karachi-Lahore Motorway project are already under construction.[87][91][354] Multan to Abdul Hakeem portion is also under construction, but is being funded by the Asian Development Bank as part of the M4 Motorway from Faisalabad to Multan.[97] The 296 kilometer long portion between Hyderabad and Sukkur is the only remaining portion of the Karachi-Lahore Motorway project that is not yet under construction.
Karot Hydropower Project	Under construction.[355] Financed by China's Silk Road Fund.[165]
Orange Line (Lahore Metro)	Under construction[145]
Pakistan Port Qasim Power Project	Under construction[356]
Quaid-e-Azam Solar Park	Under construction[156] First phase complete, generating 100 MW of electricity.[158]
Sahiwal Coal Power Project	Under construction[357]
Western Alignment projects in Balochistan province.	Under construction. Of the 870 kilometres of road in Balochistan province to be constructed/reconstructed as part of CPEC's Western Alignment, 620 kilometres have already been rebuilt as of January 2016.[101] Surab to Gwadar portion is funded by the Asian Development Bank, but is considered vital for completion of CPEC's Western Alignment.
Brahma Bahtar-Yarik Motorway	Under construction.[358]
Pakistan-China Fiber Optic Project	Under construction.[359]
Economic Corridor Support Force	Recruitment in progress[360]
Main-Line 1 railway overhaul between Karachi and Peshawar	Planning studies underway[126]
Havelian Abbottabad Dry Port	Planning studies underway
China-Pakistan Joint Cotton Bio-Tech Laboratory	Approved[203]
China-Pakistan Joint Marine Research Center	Approved[203]
Hubco coal power plant project	Approved[203]
Gwadar East Bay Expressway	Approved[203]
Gwadar Hospital	Approved[203]
Gwadar International Airport	Approved[203]
Gwadar-Nawabshah LNG terminal and pipeline project	Approved[203]
Jhimpir wind power project	Approved[203]
Main Line 2 and 3 railway overhaul	Approved[203]
Matiari to Faisalabad transmission line	Approved[203]
Matiari to Lahore Transmission Line	Approved[203]
Salt Range coal power project	Approved[203]
Suki Kinari Hydropower Project	Approved[203]
Thar Engro Coal Power Project	Approved[203]
Thar Block II coal power project	Approved[203]
Khunjerab Railway	Feasibility studies underway[203]

See also

• One Belt, One Road
• Maritime Silk Road
• Bangladesh-China-India-Myanmar Economic Corridor
• China–Pakistan relations

References