CPEC and Pakistan: Its Economic Benefits, Energy Security and Regional Trade and Economic Integration

Chinese Political Science Review (2021) 6:207–227
https://doi.org/10.1007/s41111-020-00172-z
ORIGINAL ARTICLE
CPEC and Pakistan: Its Economic Benefits, Energy Security

and Regional Trade and Economic Integration
Hafez Muhammad Javed1 · Muhammad Ismail1
Received: 18 June 2020 / Accepted: 1 December 2020 / Published online: 1 January 2021
© Fudan University 2021
Abstract
Pakistan’s geo-strategic location provides Beijing alternate routes for oil and gas
supplies from the access to the energy-rich Persian Gulf region. In April 2015, Chi-
nese President Xi Jinping visited Pakistan and announced a US $ 46 billion commit-
ment to build a multifaceted network called the China–Pakistan Economic Corridor
(the value of CPEC projects is worth the US $ 87 billion as of 2020). CPEC project
is the flagship of the One Belt, One Road initiative since it is a trunk passageway
connecting the Silk Road Economic Belt in the north with the twenty-first century
Maritime Silk Road in the south. CPEC is expected to further strengthen trade and
economic cooperation in regional states. When the corridor is constructed, it will
serve as a primary gateway for trade between China and the Middle East and Africa.
This study revealed that CPEC has important impacts on the regional state’s trade
and energy security. It will create economic security for Pakistan more as compared
to the energy and other issues.
Keywords CPEC · Economic benefits · Energy security · Regional trade · Economic

Integration · China · Pakistan
1 Introduction
The economic corridor framework,

Integrates physical infrastructure to production, trade, and investment, by way
of minimizing non-physical cross-border barriers within a specific geographic
area to promote increased flow of trade and investment, expanded access to
* Hafez Muhammad Javed

hafez.javed.phd.scholar@gmail.com
Muhammad Ismail
dr.ismail@qurtuba.edu.pk
1
Department of Politics IR, Qurtuba University, D. I. Khan, KP, Pakistan
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Vol.:(0123456789)
208 Chinese Political Science Review (2021) 6:207–227
raw materials and external markets, regional development in border areas, and
increased efficiency in the use of economic space. (Pushpanathan 2010).
The People’s Republic of China (PRC) and the Islamic Republic of Pakistan have
long-standing strategic ties, dating back five decades. Both have always enjoyed a
close, supportive relationship and have developed a unique friendship (Kataria and
Naveed 2014). In April 2015, during his visit to Pakistan, Chinese President Xi Jin-
ping stated “Pakistan and China’s struggles have brought their hearts and minds
together”, adding that “Pakistan was with us when China stood isolated.” At the
same time, Prime Minister Nawaz Sharif claimed that the two countries are “truly
iron brothers” and “Pakistan considers China’s security as important as its security”
(DAWN 2015). Although the statements of both parties seem excessive and dispro-
portional, they indicate the direction of their relationship. For decades, Pakistan has
played a key role as a cornerstone of China’s strategy for Central Asia and South
Asia. Its geo-strategic position is crucial as it serves as a gateway to the Middle East,
where China seeks access to the energy-rich Persian Gulf region.
Their cordial and supportive relationship has historical ties rooted in Beijing’s
economic, political, and military and nuclear assistance to Islamabad and a common
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Chinese Political Science Review (2021) 6:207–227 209
antagonism toward India. Their defense collaboration has been the most impor-
tant element of their overall cooperative relations (Bhalla 2007). According to the
Stockholm International Peace Research Institute (2014), Pakistan is China’s biggest
arms buyer, accounting for nearly 41 percent of Chinese arms exports (Wezeman
and Wezeman 2015). In April 2015, they concluded the sale of eight conventional
submarines worth US $ 5 billion, the biggest foreign defense deal by Beijing in its
history (Rana 2015). China also transferred equipment and technology and provided
scientific expertise to Pakistan’s nuclear weapons and ballistic missile programs
throughout the 1980s and 1990s (Curtis and Scissors 2012). Meantime, China is
involved in six nuclear power projects in Pakistan and is likely to export more reac-
tors to the country (Krishnan 2015).
CPEC Selected Special Economic Zones.
1. Rashakai Economic Zone, M-1, Nowshera.
2. China Special Economic Zone, Dhabeji.
3. Bostan Industrial Zone.
4. Allama Iqbal Industrial City (M3), Faisalabad.
5. ICT Model Industrial Zone, Islamabad.
6. Development of Industrial Park on Pakistan Steel Mills Land at Port Qasim
Near Karachi.
7. Special Economic Zone at Mirpur, AJK.
8. Mohmand Marbel City.
9. Moqpondass SEZ Gilgit-Baltistan.
The Chinese economic cooperation with Islamabad reached several high points,
with extensive investment in Pakistan’s infrastructural growth. The trade volume
increased from around US $ 6 billion in 2006 to US $ 16 billion (The Express Trib-
une 2015). A large number of Chinese companies supporting different develop-
ment projects and investments are operating in Pakistan. Currently, 10,000 Chinese
workers and 60 big Chinese companies are engaged in 122 projects in the fields of
oil, gas, power generation, and engineering, and information technology (Pakistan
Defense, 2010). More importantly, during Chinese President Xi Jinping’s visit to
Pakistan, economic cooperation entered new dimensions as the 2 countries signed
51 agreements and memorandums of understanding (MoUs) for economic and tech-
nical cooperation. The two agreed to raise their trade volume to US $ 20 billion and
pledged to continue their cooperation in civil nuclear technology (The News 2015).
Above all, Pakistan’s geo-strategic location provides Beijing alternate routes
for oil and gas supplies from the Middle East and especially access to the energy-
rich Persian Gulf region (Yang and Siddiqi 2011). In April 2015, Beijing’s crude
oil imports hit a record of almost 7.4 million barrels per day (BPD) and finally
surpassed the US as the top global importer of crude oil (Gronholt-Pedersen and
Gloystein 2015). Despite years of effort to diversify its energy supplies from places
like Africa, Latin America, Central Asia, and Russia, China remains heavily depend-
ent on Middle Eastern oil and gas, and this dependence has only grown in recent
years. In 2014, Beijing imported an average of 6.1 million barrels of oil a day with
more than 52 percent coming from the Persian Gulf region. In practical terms that
makes China vulnerable to fallout from any energy-supply disruptions in the Middle
East, without being able to do much about it (Johnson 2015).
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CPEC Selected Energy Projects.

1. 2 × 660 MW Coal-Fired Power Plants at Port Qasim Karachi.
2. Suki Kinari Hydropower Station, Naran Khyber Pakhtunkhwa.
3. Sahiwal 2 × 660 MW Coal-Fired Power Plant Punjab.
4. Engro Thar Block II 2 × 330 MW Coal-Fired Power Plant, Sindh.
5. Hydro China Dawood 50 MW Wind Farm, Thatta.
6. 300 MW Imported Coal-based Power Project at Gawadar.
7. Quaid-e Azam 1000 MW Solar Park Bahawalpur.
8. UEP 100 MW Wind Farm, Thatta.
9. Sachal 50 MW Wind Farm Thatta.
10. SSRL Thar Coal Block-I 6.8 mtpa & SEC Mine Mouth Power Plant.
11. Karot Hydropower Station.
12. Three Gorges Second Wind Power Project & Three Gorges Third Wind
Power Project.
13. CPHGC 1320 MW Coal-Fired Power Plant, Hub Balochistan.
14. Matiari to Lahore Transmission Line Project.
15. Matiari to Faisalabad Transmission Line Project.
16. Thar Mine Mouth Oracle Power Plant 1320 MW & Surface Mine.
17. Kohala Hydel Project, AJK (1100 MW).
18. Rahimyar Khan Imported Fuel Power Plant 1320 MW.
19. Cacho 50 MW Wind Power Project Sindh.
20. Western Energy Pvt Ltd. 50 MW Wind Power Project Sindh.
21. Phandar Hydropower Station 80 MW Gilgit Baltistan.
22. Gilgit KIU Hydropower Station 100 MW Gilgit Baltistan.
This study evaluates the China–Pakistan relationship, by examining how the
recent developments at the bilateral level increase Beijing’s economic and strate-
gic regional influence and might change the scope of Beijing’s influence from geo-
economic to geo-strategic in the region. Specifically, it analyzes contemporary
China–Pakistan relations, focusing on new opportunities for development that have
the potential to increase Beijing’s economic and strategic influence in the wider
Western-Asian region. This has been evident, most recently, in three several areas
of cooperation, namely, China–Pakistan Economic Corridor (CPEC); Gwadar Port
Project, etc. This research seeks to examine China’s relationship with Pakistan to
understand: Will Sino–Pak relations help Beijing realize its economic and energy
interests? Will this relationship be a game-changer and open a new chapter in Bei-
jing’s engagement and influence in the region? The answer to these questions would
have broad geo-economic and geo-strategic implications, not only for Pakistan but
also for the broader Asia region in which the US and China want to assert their
sphere of influence.
2 China–Pakistan Economic Corridor
Generally, Beijing aims to expand its influence in Pakistan and across Central and
South Asia to counter the US and Indian powers. It also wants to assert its sphere
of influence in the Middle East, South Asia, and to get access to the Indian Ocean.
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To achieve some of those objectives, Beijing has unveiled the One Belt, One Road
initiative to connect Central Asia with China and Europe. This project is the center-
piece of the Xi Jinping administration’s strategy for economic engagement and geo-
political influence in the Asia region and the rest of the world (Ministry of Foreign
Affairs 2013).
In April 2015, Chinese President Xi Jinping visited Pakistan and announced the
US $ 46 billion (the value of CPEC projects is worth the US $ 87 billion as of 2020)
commitment to build a multifaceted network called the China–Pakistan Economic
Corridor (Houreld 2015). According to Foreign Ministry Spokesperson Hong Les,
the CPEC project is the flagship of the One Belt, One Road initiative, since it is a
trunk passageway connecting the Silk Road Economic Belt in the north with the
twenty-first century Maritime Silk Road in the south (Ministry of Foreign Affairs
2015). The CPEC project includes the establishment of a network of railways, roads,
and pipelines connecting Pakistan’s port city of Gwadar in the province of Balu-
chistan with the Chinese city of Kashgar in landlocked Xinjiang. It requires infra-
structural upgrades to Pakistan’s outdated railway system, road network, pipelines,
ports, and electricity production, as well as the stabilization of Islamabad’s security
environment. The overall construction costs of the CPEC project are estimated at
over US $ 46 billion, with US $ 33.8 billion in various energy projects and US $
11.8 billion in infrastructure projects over 15 years (Zahra-Malik 2014).
Pakistan has a central role in promoting the CPEC project, given its position
at the nexus of South and Central Asia, with the Arabian Peninsula nearby off its
southern coast. Beijing’s plans for a land-based Silk Road Economic Belt and a sea-
based Maritime Silk Road would rely on a functional China–Pakistan Economic
Corridor (Panda 2015). As Pakistan’s Ambassador to the UAE Asif Ali Khan Dur-
rani observed, the CPEC would be a game-changer and its major beneficiaries would
include Pakistan, China, and Gulf countries (Al Bawaba 2015).
Pakistan’s proximity to markets in the Middle East and Africa serves as a primary
gateway for trade between China and these regions. The CPEC project would link
Pakistan’s southern Gwadar port on the Arabian Sea to China’s western Xinjiang
region, by a network of highways, railways, and pipelines, which could improve con-
nectivity between Beijing and the Middle East (Islam 2015). In particular, oil from
the Middle East could be offloaded at Gwadar and transported to China through Bal-
uchistan. It also gives Beijing a direct land route to the Indian Ocean basin, the site
of 70 percent of the global oil traffic (Detsch 2015).
Although the distance from Kashgar to Shanghai (where the oil is needed) is
additionally 5100 km, there is strategic and economic logic for the CPEC project.
It is designed to give Beijing an alternative trade route to ports on its eastern and
southern coasts, and therefore, cheaper market access to the Middle East and Africa
(Hashim 2015). The distance from the Middle East to Shanghai is about 9500 miles,
while the distance from the Middle East to Xinjiang via Pakistan is only 2500 miles;
hence, this would be a more feasible route in terms of distance, time, money, and
more importantly safety (Zaki 2014).
Every day, China spends some US $ 18 million for importing 6.3 million bar-
rels of oil as shipping costs from the energy-rich Persian Gulf region, accounting
for 80 percent of all its oil needs, routed through the Strait of Malacca and covering
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a distance of 9912 miles. The CPEC project would bring these costs significantly
down to one-third of the current levels, as the new distance would be 3626 miles to
Central China and only 2295 miles to West China (Salman 2015a, b).
Moreover, the CPEC project also has strategic logic. Beijing would get easy
access to the energy-rich Persian Gulf region, a direct overland route to the Indian
Ocean basin, and enhanced naval projection capabilities. This additional gateway to
the Gulf countries’ oil reduces its dependence on and vulnerability in the Strait of
Malacca (Siddiqi 2014) through bypassing the increasingly busy and dangerous sea
lane, in the event of a future war in Asia. Therefore, it provides Beijing a hedge
against the ability of the US Navy or another competing power (India) blocking the
Strait of Malacca (Shah and Page 2015). Additionally, the CPEC project may pro-
vide China with a firm and reliable long-term beachhead in the Indian Ocean close
to the Persian Gulf, effectively making China a two-ocean power (Rakisits 2015).
The implementation of the CPEC project could provide a new geo-strategic
reality and geo-economic advantages to Beijing’s engagement and influence in the
Middle East, South Asia, and Central Asia. First, CPEC can help China improve
economic opportunities for its population, modernize its Xinjiang western region,
and thereby reduce the local resentment of the central government (Vandewalle
2015). China hopes to leverage its supportive relationship with Pakistan as a key
factor in its counter-terrorism policy. For some years, the Chinese government has
been disappointed with the extent of Pakistan’s support in curbing the activities of
the Uyghur separatists. Some Uyghur militants have training camps in Pakistan’s
rugged borderlands with Afghanistan. For example, the Urumqi riots were spear-
headed by elements that received their training in the camps of the East Turkestan
Islamic Movement inside Pakistan, most probably in the terrorist camps organized
by Al-Qaeda (The Express Tribune 2010). Moreover, Chinese authorities are trying
to moderate the Uyghur militant in Xinjiang with the help of the Uyghur community
in Pakistan comprised migrants who left Xinjiang over the last century. Since the
11 September 2011, attacks, China has acknowledged the presence of the Uyghur
migrants in Pakistan and began to actively interact with them, in particular, using
them to dissuade the Xingjiang Uyghurs from terrorists activity in China (Rippa
2010).
Second, ever since the late 1970s, economic development has emerged as the
core component of China’s grand strategy as a key to enhancing China’s compre-
hensive national power and as crucial to the legitimacy of the Chinese government
(Yang 2006). CPEC aims to provide Chinese companies with new markets for large
infrastructural investments, and this would compensate for the slowing growth rate
of the Chinese economy (BBC News 2015).
Additionally, the completion of the CPEC might also enable Beijing to secure
Afghanistan’s mineral wealth and influence Kabul to ensure there is no spillover of
radical Islamism from the region into Xinjiang. In light of the US’s decision to pull
out its troops from Afghanistan, China is undoubtedly hopeful of filling the space
and would be able to have an even deeper influence upon the region (Hughes 2015).
Finally, CPEC can further strengthen cooperation, trade, and economic ties between
China and Pakistan (Tiezzi 2014). However, some potential threats and challenges
could affect the realization of the CPEC project (Sial 2014). The challenges can be
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divided into political, security, and economic dimensions, which have further inter-
nal or external dimensions. First, the political challenge of instability and insecurity,
both internal and external; internally, ever since independence, Pakistan has been
facing political instability, a major obstacle to its development. At the international
level, the CPEC project is a cause of alarm especially to the US and India, who con-
sider it as China’s strategy to encircle India or a way to expand its influence in the
region and to get access to the Arabian Sea. Therefore, they have tried many times
by diplomatic means to deter Pakistan from involvement with China’s project (Islam
2015).
Second, security issues remain the primary challenge to the realization of the
CPEC project (Pande 2015). For several years, Islamabad has been engaged in the
war against terrorist groups that might threaten or attack the CPEC project. These
security problems can affect and delay the implementation of projects under CPEC
(Jamal 2015). Additionally, the economic challenge causes controversy and skepti-
cism: the CPEC project could fall prey to the corruption problem that plagues many
economic ventures in Pakistan. Furthermore, there is a considerable gap between
what China has promised Pakistan in the past and what it delivered. Only about six
percent of the US $ 66 billion that China pledged to Pakistan as aid and investment
between 2001 and 2011 was materialized (Wolf, Wang, & Warner, 2013). The bot-
tom line is, the CPEC faces considerable hurdles and risks, thus, ultimately may not
become the long-awaited game-changer helping Beijing to expand its influence in
the region.
3 CPEC BACKBONE: The Gwadar Port Project
The Gwadar Port project is the centerpiece of the China–Pakistan strategic part-
nership and one of their most significant joint development projects in recent years
(Haider 2015) and is key to the future of China–Pakistan’s long-standing economic
and strategic ties. Gwadar holds a central place in the feasibility of the CPEC project
because without making the Port fully functional, it would be difficult for Beijing
to see the anticipated corridor as an energy and economic corridor, one of the main
objectives behind the CPEC (Debasish and Chowdhury 2013). Eventually, when the
Gwadar Port is operational and the CPEC project is completed, it would likely take
China–Pakistan relations to new heights, and their “all-weather” friendship would
be ensured.
China has both financed and constructed the deep-sea port at Gwadar in Paki-
stan’s province of Baluchistan on the Arabian Sea. In the first phase, including three
multipurpose ship berths, the total cost was US $ 1.16 billion of which Beijing
invested US $ 198 million. In the second phase, Beijing financed the construction of
the highway from Gwadar port to Karachi port on the Arabian Sea, at the US $ 200
million. China has committed to also finance 9 ship berths, including storage termi-
nals, and providing 54 engineers to provide technical expertise in this project. The
Gwadar Port complex, inaugurated in December 2008 and now operational, provides
a deep-sea port, warehouses, and industrial facilities for more than 20 countries (Zeb
2012). In April 2015, Pakistan handed over 40-year operational control rights of the
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Gwadar Port to Chinese Overseas Port Holdings Ltd. China would invest another
US $ 200 million in the port plans and US $ 1.62 billion in railways, roads, and
pipelines linking Gwadar to China (Desk 2015). It could serve as a great port for the
western China-based industry and as an important export zone for outsourcing for
the entire region (Mir 2010).
The importance of Gwadar Port cannot be underestimated given its strategic sig-
nificance, energy security, and economic development. The Gwadar project is very
significant for China’s national security since the port is strategically located to serve
as a key shipping point in the region. Its location at the mouth of the Persian Gulf
and the opposite end of the strategic choke points of the Strait of Hormuz and the
Gulf of Oman enables China to exercise considerable regional influence (Naseem
2014) and can provide China a strategic foothold in the Arabian Sea and the Indian
Ocean. This would enable China to monitor its energy shipments from the Persian
Gulf and provide a forward base to monitor US naval activity in the Persian Gulf,
Indian activity in the Arabian Sea, and future US–India maritime cooperation in the
Indian Ocean (Kapur 2003).
More importantly, although Gwadar Port was constructed as a commercial port
rather than as a facility for China’s navy, yet it can potentially develop as one in the
future (Rakisits 2015). The port could also provide an observation post, and even a
foothold, for the Chinese People’s Liberation Army (Gladstone 2015). India’s “Blue-
Water Navy” dream and the US 5th fleet presence in the Persian Gulf are a major
threat to the security of both China and Pakistan. Therefore, Islamabad has offered
Beijing to convert the Gwadar port into a naval base for Chinese use. Beijing, how-
ever, rejected the offer of formally establishing a military base in Pakistan lest it
antagonizes Washington and New Delhi (Rousseau 2014). The port is important
strategically that Washington reportedly tried to pressure Islamabad to reduce Chi-
nese involvement in the project and to involve the US instead (Ramachandran 2006).
Some defense experts suggest that Beijing’s-aid in helping Pakistan build the Gwa-
dar port for the growing Chinese navy, which has submarine bases in Sri Lanka and
Bangladesh, shows that China is deliberately encircling India with its naval fleet,
giving the latter less strategic breathing space (Muhyuddin 2015).
The Gwadar project also has far greater significance and economic impact on
China’s energy security. Foreign trade has been a key driver for China’s fast-growing
economy, but most of its trade with Europe, Africa, and the Middle East has to trav-
erse the Strait of Malacca, an unsafe route, notorious for piracy (Shaofeng 2010).
Beijing is also wary that the US Navy might cut off its oil supplies coming through
the Malacca Strait in the event of an increase of hostilities over Taiwan. Therefore,
Gwadar’s location opposite to the Straits of Hormuz provides Beijing an alternative
to the Strait of Malacca (Naseem 2014). Gwadar Port is the western-most “pearl”
in China’s “string of pearls” strategy that envisages building strategic relations with
several countries along sea lanes from the Middle East to the South China Sea to
protect China’s energy interests and other security objectives (Holmes 2013).
More importantly, the port may also enable China to diversify its crude oil import
routes and extend its presence in the Indian Ocean. China has interests in monitoring
the supply routes for its rapidly increasing energy shipments from the Persian Gulf
and opening an alternative route via Pakistan for trade serving its vast, restive, and
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rapidly developing Xinjiang Region. Beijing has shown interest in laying a pipeline,
construction road, and rail network from Gwadar to Xinjiang for transforming it into
an energy-transport center. Through this pipeline or network of road and rail, Beijing
would be able to directly procure oil from the Gulf to its western provinces (Naseem
2014). Gwadar Port is some 400 km away from the Strait of Hormuz, which accord-
ing to the EIA is the world’s most important chokepoint with an oil flow of 17 mil-
lion BPD, about 30 percent of all seaborne-traded oil. The EIA estimates that more
than 85 percent of the crude oil that moved through this chokepoint went to Asian
markets, with China being the largest destination (EIA Beta 2014).
In 2014, the Middle East was the largest source of China’s crude oil import and
supplied Beijing with 3.2 million bbl/d or 52 percent of crude oil, which would
increase over the next decade (EIA Beta 2015). A pipeline from Gwadar to west-
ern China would greatly reduce the time and distance required to transport the fuel
(Naseem 2014). Moreover, converting the Gwadar city into a free-trade zone would
transform the harbor into a major Indian Ocean port. The entire network of projects
could connect with pipelines to Iran and trade routes through Afghanistan, and could
potentially even help develop economic links with India (Small 2015). Furthermore,
Gwadar bears central importance to China’s economic development and its global
trade relations. As mentioned, the CPEC project as an important part in understand-
ing the potential of regional connectivity and trade by connecting Gwadar Port to
Xinjiang, by the network of highways, railways, and pipelines, which would provide
trade links between China and the markets in Central Asia, South Asia, and the Mid-
dle East (Islam 2015).
To sum up, Gwadar Port has become a milestone in China–Pakistan friendship
and has the potential for becoming the future economic and energy regional hub
(Anwar 2010). The port can give Chinese strategy significant donor leverage, link-
age, control, or even influence in the Middle East, South Asia, and the Indian Ocean
(Rakisits 2015). Gwadar would play a critical part in China’s land and maritime silk
routes, linking it with Central Asia and beyond. There are, however, several poten-
tial threats and risks that could affect the implementation of the project (Sharma
2013). If Gwadar Port can develop into a transit facility or an oil pipeline hub, this
would be a major achievement for China’s economy and energy security. Only after
that milestone is reached, one can talk about the development of Gwadar Port as a
Chinese naval base (Yousaf 2013). Beijing is still many decades away from becom-
ing a threatening naval power in the Indian Ocean because it has prioritized the cul-
tivation of the commercial rather than the strategic dimension. Gwadar Port may
well ultimately be a strategic game-changer, but only time would tell.
4 Theoretical Debate
Any discussion of the economic corridor is usually in terms of fairly general for-
mulations with emphasis on improved transport infrastructure and connectivity
across for promoting increased trade and regional development. In the process,
the corridors are expected to evolve through various stages. It is not easy to con-
struct a theoretical framework to understand the evolution of economic corridors
13
as it covers a broad spectrum of activities and stakeholders spread across a defined

region. Also, some of the empirical results contained in the volume provide a
static view of one-off gains but do not adequately capture the synergies developed
by businesses starting along the economic corridors, the foreign investment likely
to be attracted as facilities improve, or the spillovers from these types of invest-
ments throughout the economy. The study does, however, show clear gains from
improvements in physical land transport and the more substantial gains from
improved trade facilitation. These results imply that physical infrastructure must
be in place for trade to take place. However, once in place, attention should turn
to soft aspects of trade facilitation.
As noted in Kimura and Kobayashi (2009), the fragmentation theory argues that
the key to attracting fragmented production blocks is improving locational advan-
tages by, for example, developing special economic zones (SEZs) with an improved
climate for local investment; and reducing the cost of service links that connect
remote production blocs by improving trade and transport facilities. In the fragmen-
tation of production, improved service links, such as economic corridors, are impor-
tant for the expansion of production networks across a region.
Given its resources and strategic location, Pakistan has the potential to become
an Asian powerhouse in terms of trade and investment. Economic corridors connect
economic agents along with defined geography. They provide important connections
between economic nodes or hubs. Economic corridors accomplish much more than
linking point A to point B along which people and goods move. They do not stand
alone, as their role in regional economic development can be comprehended only
in terms of the network effects that they induce. Economic corridors do not gener-
ate significant economic benefits in isolation, but rather they have to be analyzed as
part of integrated economic networks, such as global and regional value chains and
production networks. Economic corridors are best defined by their characteristics,
and it is through the characteristics’ measurement that economic corridor perfor-
mance can be determined and monitored. The spatial and temporal dimensions of
economic activity and trade are critical for understanding the impact of economic
corridor investments.
The function of an economic corridor is to connect economic agents acting in a
defined geographical area. The concept of using transport corridors as a means to
develop the regions around the corridors is known as the economic corridor con-
cept or the development corridor concept. The economic corridor approach looks
at regional transport routes not only as a means of transporting goods and services
but also as a tool for stimulating social and economic development in the areas sur-
rounding the route. Economic corridors accomplish this by creating industry and
social infrastructure in conjunction with transport infrastructure. Political bounda-
ries thus cease to be economic boundaries, and spatial–economic regional planning
takes the lead. In short, the economic corridor approach transforms transport cor-
ridors into engines of socio-economic development. Generally, the characteristics of
economic corridors can be summarized as:
(i) Defined geographic space, usually the area straddling a central transport
artery, such as a road, a rail line, or a waterway;
(ii) Focusing on strategic nodes, particularly border crossings;
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(iii) An emphasis on physically planning and infrastructure development in par-

ticular to maximize benefits; and;
(iv) Strong public–private partnerships, which promote sustainability.
Callahan (2016) argued that since Xi Jinping became a leader in 2012, he has
redirected Chinese foreign policy. This article examines the role of peripheral diplo-
macy in Xi’s emerging grand strategy. While it is popular to look to theories of the
international system—offensive realism and liberal institutionalism—to explore
this issue, this article follows constructivism to take seriously the role of ideas and
domestic politics in foreign policy-making. Through an analysis of official and unof-
ficial sources, it traces linkages between ideas, institutions, and behavior in Chinese
foreign policy. In particular, it argues that Beijing is combining new ideas (China
Dream, Asia Dream), new policies (comprehensive diplomacy and security), new
institutions (AIIB), and new projects (BRI) to build what Xi calls the ‘community of
shared destiny.’ The goal is to weave neighboring countries into a Sino centric net-
work of economic, political, cultural, and security relations. Beijing’s grand strategy
thus is to re-constitute the regional order—and eventually global order—with new
governance ideas, norms, and rules. Hence, while the Asian region is an important
focus of Chinese foreign policy, Beijing’s peripheral diplomacy is about more than
win–win cooperation in the neighborhood. It also acts as the means to the much
larger end of promoting China’s new vision of global governance. Theoretically, the
article shows how ‘connectivity’ is more than an issue of the ‘hardware’ of physical
infrastructure; it is also a ‘software’ issue of the connectivity of ideas, institutions,
and behavior in diplomacy itself.
De and Iyengar (2014) argued that from the roads of ancient Rome to the nine-
teenth-century canals and railways of the United Kingdom and the Erie Canal
and trans-continental railroad in the United States, development tends to hap-
pen along corridors. Corridors are also natural markets and trade routes for all
products. Since ancient times, trade has taken place along linear corridors. One
of the most significant trade corridors, the ancient Silk Road that covered 4,000
miles and connected China, India, the West Asia, and Central Asia to markets
in the Mediterranean and Europe, is once again being developed. And in India,
plans are afoot for a massive new $90 billion industrial corridor—including nine
special industrial zones, power systems, and new ports and airports linked to a
high-speed freight line—that will stretch from Delhi to Mumbai, encompassing
a region that contains a seventh of the country’s population. East Asia is one of
the most economically integrated regions in the world in terms of low barriers to
trade and investment. It is openly linked to a supplier network residing in neigh-
boring Southeast Asia. Going beyond transport corridors, the Asian Develop-
ment Bank (ADB), for example, first used the term ‘economic corridor’ about its
Greater Mekong Sub-region (GMS) program in 1998 to encompass cooperation
in infrastructure to help promote economic growth and social development. The
GMS comprises Cambodia, Lao People’s Democratic Republic, Myanmar, Thai-
land, and Viet Nam, as well as Yunnan Province and Guangxi Zhuang Auton-
omous Region of the People’s Republic of China (PRC). The GMS Transport
Sector Strategy (2006–2015) identified nine road corridors that will form the
sub-region-network of transport links. They form the base for the development
13
of economic corridors. In contrast, South Asia is one of the least economically

integrated regions in the world, with comparatively high barriers to trade and
investment.
Neogi (2014) estimates an augmented gravity model to analyze trade flows
between countries of the South Asian region. Incorporating policy variables such as
tariff rates, the forces behind industrial agglomeration are identified. Industrial con-
centration is measured at the regional level with industry-level data. There are dif-
ferences in the factors responsible for industrial agglomeration in cross-border trade.
Neogi (2014) points out that the new economic geography theory underplays eco-
nomic policies and geography. When trade costs are in a certain range, both agglom-
eration and diversification are possible equilibriums, so history and policy have a
potential role in influencing the equilibrium. The chapter tests the roles of both poli-
cies and history in influencing agglomeration. The findings corroborate the expected
effects of border cost and time on trade volume. It confirms that agglomeration of
industries in India, among other things, depends on new economic geography vari-
ables such as infrastructural facilities in the border region, and human capital. Thus,
developed infrastructure in the border region facilitates trade and regional develop-
ment through the agglomeration of industries.
According to the framework of the new economic geography theory, the fol-
lowing factors are essential for industrial agglomeration:
1. The local stock of human capital.

The more the stock of human capital, the less the cost of research and develop-
ment (R&D), and the easier to gain from innovation.
2. Market size.
Firms tend to agglomerate where the regional market size is large. Other things
being equal, the size of a local market will be large with high per capita income
and large population size.
3. Trade costs.
These are some of the core parameters in the new economic geography theory.
Lower trade costs, such as lower transaction or transportation costs, will encour-
age industrial concentration. These are some of the core parameters in the new
economic geography theory. Lower trade costs, such as lower transaction or trans-
portation costs, will encourage industrial concentration (Martinez-Zarzoso et al.
2003).
What should be emphasized is that the new economic geography theory does
leave space for other factors such as economic policies and geography to play
their roles. As stated by Neary (2001), when trade costs are in a certain range,
both agglomeration and diversification are possible equilibriums, and history and
policy have a role in influencing which equilibrium prevails.
Institutions may also have an indirect impact on income levels through trade, as
high-quality institutions reduce the risk premium required for international trade.
Conversely, trade may influence the quality of institutions and their governance.
From a theoretical perspective, there are three main channels for a positive linkage.
13
1. First, economic agents in open economies may learn from their experience in
other countries and adapt (or imitate) successful institutions and regulations.
2. Second, international competition may force countries to improve their institu-
tional and regulatory mechanisms.
3. Third, rent-seeking and corruption may be harder in more open economies, as
foreign firms increase the number of economic agents involved (Rajan and Zin-
gales 2003).
Better regional institutions improve the regional investment climate and increase
foreign direct investment (FDI) inflow into each country (Busse et al. 2007).
Theoretically, countries can be expected to benefit from lowering trade barriers,
mainly from exchange and specialization through trade. However, trade benefits
would be suboptimal or unattainable if they are not supported by adequate infra-
structure and institutions that practice good governance (Kohsaka 2007). Smaller
economies are less likely to achieve welfare gains from trade liberalization because
of perennial economic asymmetry, where increased market access to them may
have no positive effect in the short to medium term. The poor quality of institutions
has been identified as a major reason for the disappointing export performance of
smaller economies. (World Bank 2001; Jütting 2003; Levine 2005) Therefore, many
FTAs go beyond the standard features by emphasizing the.
1. Political dimension,
2. Explicitly addressing corruption,
3. Promoting participatory approaches, and
4. Refocusing development policies on poverty reduction.1
What follows is that infrastructure and growth are positively correlated, and the
quality of institutions and correct policies matter to long-run economic growth.
Meanwhile, in line with the theory of path dependence, that earlier decisions
and developments structure future constraints and opportunities, 71 the US is con-
strained by the consequences of its past policies whereby some highly influential
domestic actors have become stakeholders in making China stronger and stronger.
Ordinarily, the US would have confronted a serious dilemma, torn as it would have
been between a rising China constituting a threat to its hegemony and a powerful
part of its business community committed in its interest to fueling precisely the
power of that rising China. However, the emergence of the new threat of terrorism in
2001 and after has sidetracked the US from having to contend with this dilemma, at
least for now.
It is, no doubt, difficult to make predictions about what adjustments the US
will find necessary in its future posture toward China to preserve unipolarity and
its hegemonic position within it. The US may well feel that the successful comple-
tion of modernization will eventually lead to China having a stake in the present
1
The Cotonou Agreement between the African, Caribbean and Pacific Group of States(ACP) and the
European Union (EU).
13
international system presided over by the US. Moreover, the distance between
American and Chinese power is so vast that it cannot be quickly traversed and thus
may not cause immediate concern to the US, especially given the latter’s structure of
alliances and military bases in Asia. Besides, China’s dependence on the American
market also has its constraining effects on it as well, not just in the US. Napoleon
Bonaparte once described China as a sleeping giant. China has since come a long
way and has now emerged as one of the formidable powers in Asia and the world.
China’s rising economic and military power is a cause for concern not only among
its neighbors but also for the United States (US)—the world’s only ‘superpower’.
The inevitable question to China’s rising status in international politics is how Asian
states are responding to China’s burgeoning power. Realist theories in the study of
international relations suggest that states either balance or bandwagon against poten-
tial threats (Schweller 1994; Walt, 1985: 208–48, 1987). From that perspective,
some scholars also suggest that Asian states are not able to maintain a balance in
their relations with China. Instead, they seem to be joining the bandwagon (Youk-
ang 2003).
5 Variables, Hypotheses, and the Data
This investigation is based on the survey data conducted in rural areas of Pakistan.
The researcher assessed a few recommendations about the benefits of CPEC for
Pakistan. This study was based on the empirical data from different areas of Paki-
stan, collected from January 2019 to December 2019.
6 List of Hypotheses
H01: There is no significant correlation between CPEC and its Importance for
Pakistan.
H02: The CPEC is not contributing significantly to Pakistan Economic Security;
Energy Security; Regional Trade and Economic Integration.
H03 = There is no significant mean difference in the masses’ opinions about
CPEC’s relationship and its importance for Pakistan.
Altogether, the analysis collected opinions from 384 from the students with the
background of International Relations; Defense and Strategic Studies; Peace and
Conflict Studies, and Political Science from different universities of the country. The
reviews included four areas and contain a sum of 36 items of questionnaire. This
study utilizes a Likert Scale of 1 (strongly disagree) to 5 (strongly agree).
7 The Analysis of the Data
The dependent variable of this study is the benefits of the CPEC for Pakistan. The
first part of the study was based on the respondents’ profile. The second part of the
study was based on CPEC association with the benefits for Pakistan. Furthermore,
13
Table 1 Pearson r correlation PakEneSec PakEcoSec RTEI

moment
CPEC
Pearson correlation 0.959** 0.987** 0.734**
Sig. (2-tailed) 0.000 0.000 0.000
N 384 384 384
PakEneSec
Pearson correlation 0.955** 0.746**
Sig. (2-tailed) 0.000 0.000
N 384 384
PakEcoSec
Pearson correlation 0.733**
Sig. (2-tailed) 0.000
N 384
RTEI
Pearson correlation
Sig. (2-tailed)
N
**Correlation is significant at the 0.01 level (2-tailed)
the third part of the study was based on the role of CPEC contributing to the benefits
for Pakistan. Respondents were asked to choose from 5 point Likert-scale, “Strongly
disagree,” to “Strongly Agree.” According to the survey, out of 384 respondents,
there were 222 males (57.8%) and 162 were female (42.2%). There were 62 respond-
ents who had the BS/Masters level education (16.1%), 147 respondents of the
M.Phil group (38.3%), and 175 respondents of the Ph.D. group (45.6%). There were
245 (63.8%) urban respondents and 139 (36.2%) respondents were rural. The survey
data allow correlation and regression analyses on the benefits for Pakistan due to
CPEC, at the individual level (Table 1).
The Pearson correlation moment between CPEC is found positive, strong,
and significant with all the criterion or dependent variables. First of all, CPEC
is highly correlated with Pakistan Economic Security (r = 0.987, p = 0.000), it
means that the respondent selected for this study believed that CPEC is strongly
associated/correlated with Pakistan’s Economic Security. The positive of the
correlation indicated that if this corridor develops, it would have resulted in the
development of Pakistan’s economic security as well. Furthermore, CPEC is also
highly correlated with Pakistan Energy Security (r = 0.959, p = 0.000), it means
that the respondent selected for this study believed that CPEC is strongly asso-
ciated/correlated with Pakistan’s Energy Security. The positive of the correla-
tion indicated that if this corridor develops it would have resulted in the devel-
opment of Pakistan’s energy security as well. Furthermore, CPEC is also highly
correlated with Pakistan’s Regional Trade and Economic Integration (r = 0.734,
p = 0.000), it means that the respondent selected for this study believed that
CPEC is strongly associated/correlated with Pakistan’s Regional Trade and Eco-
nomic Integration. The positive of the correlation indicated that if this corridor
13
Table 2 Regression model CPEC

(cause and effect relationship)
Model 1 R2 = 0.974 0.000**
Pakistan’s Economic Security
Model 2 R2 = 0.920 0.000**
Pakistan’s Energy Security
Model 3 R2 = 0.538 0.000**
Regional Trade and Economic Integration
Table 3 Test of significance, independent samples t test, and one-way ANOVA

Gender Residence Family income
CPEC 0.856 0.228 0.681

Pakistan’s Economic Security 0.972 0.237 0.552
Pakistan’s Energy Security 0.777 0.823 0.973
Regional Trade and Economic Integration 0.552 0.923 0.665
develops it would have resulted in the development of Pakistan’s regional trade

and economic integration as well. The researcher found enough evidence to reject
the null hypothesis that there is no significant association between Predictor var-
iables (CPEC) and the Outcome variable (Importance for Pakistan), hence the
hypothesis is rejected.
At this point, the Hierarchical Regression Model (HRM) gives the impres-
sion the greatest suitable statistical method for the reason that the measurement
natures of the variable are at least ordinal. For that reason, to discover the causal
relationships amid explanatory variables and the importance of CPEC for Paki-
stan, the regression results are mentioned in Table 2.
The Model Summary table reflected that according to the opinion of the
respondents, the CPEC is significantly contributing to Pakistan’s Economic Secu-
rity which is up to 0.974 or 97.4% or 97%. Furthermore, the next model sum-
mary also reflected that according to the opinion of the respondents, the CPEC
is significantly contributing to Pakistan’s Energy Security which is up to 0.920
or 92.0% or 92%. Nevertheless, the next Model Summary table reflected that
according to the opinion of the respondents, the CPEC is also significantly con-
tributing to the Regional Trade and Economic Integration which is up to 0.538 or
53.8% or 54% (Table 3).
The analysis revealed that there was no meaningful difference in opinion based
on gender, residence, and family income on all research variables. It means that
whether the respondents were male or female, either the respondents belong to
urban or rural areas or the respondents were of whichever income group had a
similar opinion about the impact and contributions of all the research variables.
13
8 Discussion and Conclusion
The friendly, affectionate, as well as compassionate association amid Pakistan

and China, has historic relations entrenched in China’s political, economic in
addition to military support to Pakistan. It is revealed through the in-depth analy-
sis that the strategic partnership of the Chinese government with the government
of Pakistan plays a dominant and significant starring role in the geopolitics of the
Asian region, as of the rise of India to the projections and forecasts designed for
the post-American Afghanistan, as of the danger associated with the nuclear ter-
rorism to the region’s new-fangled chart of coal mines as well as others, harbors,
in addition to pipelines. Intended for China, Pakistan’s leading and most impor-
tant situation in its geo-political worth in addition to the boundless economic cor-
ridor as well as an energy-transport epicenter and focal point.
Pakistan situated at the core of the Chinese government’s geo-strategic motiva-
tions, ambitions, determinations in the region, as of its naval projection compe-
tences to its splendid and magnificent strategies designed for a new-fangled silk
highway linking the Middle Eastern energy arenas and the European markets.
Pakistan is as well dedicated to as well as working together in the determinations
of the government of China to combat terrorist elements, separatists, as well as
the religious fanaticism.
The outcomes and conclusions of the study demonstrate that the project of
CPEC, the deep-sea port at the Gwadar Harbor, as well as the IP pipeline of
gas, are encouraging and favorable developments in addition to new prospects
intended for the energy and economic security for the Chinese government
in the region. However, more than a few prospective and possible dangers, as
well as challenges, could disturb the carrying out of these developments. As a
result, the Pak–China must contemplate all external and internal features which
can bully the recognition and realization of these schemes and developments; to
effort improved as well as further meticulously together, in addition, to guarantee
improved and enhanced application as well as accomplishment of the current con-
tracts and arrangements in a well-timed manner. Besides, this research study tried
to comprehend whether the new-fangled growth and expansion in the Pak–China
relationships is a game-changer that would bring transformation in China’s stra-
tegic and economic influence in the oil-abundance region of the Middle East. It
is a matter of fact that Pakistan, for the predictable future, possibly can play an
important part in the foreign policy of the Chinese government as well as com-
mitment in the oil abundant region of the Middle East.
The factual prospect presented through the Pakistan and China commitment
is that it brought variations in the possibility of the Chinese impact and effect
as of geo-economic to geostrategic; also the combined schemes and projects
would have a noteworthy and momentous transformative influence on stress-
ing its sphere of effect and inspiration in the region of the Middle East, South in
addition to Central Asia, the Indian Ocean in addition to away from that region.
The researcher has found enough evidence to conclude that the Chinese govern-
ment is by this time effective in influencing the foreign policy of Pakistan, as
13
demonstrated in the situation of Yemen’s civil war as well as the normalization

and stabilization procedure through Afghanistan. On the other hand, the genuine
game-changer is not the purpose of creating combined undertakings and projects;
it is their well-timed putting into practice that has the prospect and possibilities
to produce a regional impression.
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Professor at Department of Politics & IR, Qurtuba University, D. I. Khan, KP, Pakistan.
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CPEC and Pakistan: Its Economic Benefits, Energy Security and Regional Trade and Economic Integration

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CPEC and Pakistan: Its Economic Benefits, Energy Security and Regional Trade and Economic Integration

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Chinese Political Science Review (2021) 6:207–227

CPEC and Pakistan: Its Economic Benefits, Energy Security

Keywords CPEC · Economic benefits · Energy security · Regional trade · Economic

The economic corridor framework,

* Hafez Muhammad Javed

CPEC Selected Energy Projects.

2 China–Pakistan Economic Corridor

3 CPEC BACKBONE: The Gwadar Port Project

as it covers a broad spectrum of activities and stakeholders spread across a defined

(iii) An emphasis on physically planning and infrastructure development in par-

of economic corridors. In contrast, South Asia is one of the least economically

1. The local stock of human capital.

5 Variables, Hypotheses, and the Data

7 The Analysis of the Data

Table 1 Pearson r correlation PakEneSec PakEcoSec RTEI

**Correlation is significant at the 0.01 level (2-tailed)

Table 2 Regression model CPEC

**Correlation is significant at the 0.01 level (2-tailed)

Table 3 Test of significance, independent samples t test, and one-way ANOVA

CPEC 0.856 0.228 0.681

**Correlation is significant at the 0.01 level (2-tailed)

develops it would have resulted in the development of Pakistan’s regional trade

The friendly, affectionate, as well as compassionate association amid Pakistan

demonstrated in the situation of Yemen’s civil war as well as the normalization

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2 China–Pakistan Economic Corridor

3 CPEC BACKBONE: The Gwadar Port Project

5 Variables, Hypotheses, and the Data

7 The Analysis of the Data

Table 1 Pearson r correlation PakEneSec PakEcoSec RTEI

Table 2 Regression model CPEC

Table 3 Test of significance, independent samples t test, and one-way ANOVA