China already accounts for 46% of Pakistan’s trade deficit – yet few have questioned acceptance of huge loans as part of a new economic alliance

Chen Zhu, a 46-year-old director of a Chinese shipping company in Karachi, Pakistan, was sitting in his car after finishing lunch. He had dispensed with his normal security since it was a public holiday, and his next task for the day was to buy some groceries.

An unknown assailant crossed the road, approached Chen’s car and shot him nine times. He was declared dead soon after reaching hospital.

The motive for what was clearly a pre-planned attack is not just of interest to the police and Zhu’s family. If it was a killing designed to threaten Karachi’s growing Chinese business community, it underlines how Pakistan’s decision to place so much of its economy in the hands of state investors from its much larger neighbour is resented by those who fear the country will become a de facto colony of China.

Q&A Cities of the New Silk Road: what is China's Belt and Road project? Show Hide China’s Belt and Road Initiative is a huge, $1tn infrastructure project to better connect China – and Chinese goods – with the rest of the world. It is meant to be a 21st-century "silk road", made up of a "belt" of overland corridors (including roads, bridges and railways) and a maritime "road" of shipping lanes. Its wider ambitions are harder to pin down. Is it a bid by China for world domination, or simply a move to prop up Chinese companies at home? Is there a grand strategy, or is it just a rebranding of existing projects? In Cities of the New Silk Road we have endeavoured to find out, by exploring the project's tangible results so far – from the newly built city of Khorgos on the Kazakhstan border to Duisburg, dubbed “Germany’s China city”. Our correspondents have reported from the “next Dubai” rising out of the sea in Sri Lanka, the nascent port of Gwadar in a restive province of Pakistan, the sleepy Tanzanian village that could be transformed into Africa’s largest port, and more.

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The framework for the economic alliance is a deal known as the China-Pakistan Economic Corridor (CPEC) unveiled when Xi Jinping, the Chinese president, came to Pakistan in 2015. CPEC is a series of mainly Chinese-financed energy and infrastructure projects totalling upwards of $62bn in grants and soft loans – of which around $26bn is earmarked for power plants.

The project is branded around the theme of connectivity: power stations, ports, dams, transmission lines, roads and fibre optic cables linking Pakistan to the Chinese internet. Among projects to be completed in 2018 are a mass-transit light railway in Lahore, and a coal-fired power plant in Karachi.

Concerns over China’s ambitious Belt and Road Initiative have been expressed from Germany to Australia, but such worries do not find many echoes in Islamabad or Karachi, Pakistan’s largest port and commercial capital.

Pakistan has taken a huge strategic bet with China, and few mainstream politicians are challenging this gamble, save to demand their region gets a larger slice of cash.

Both military and civilians say this will be the Chinese century – and it is Pakistan’s good fortune to be in with China on the ground floor. The official rhetoric is all about “an all-weather friendship between iron brothers”.

Muhammad Zubair, the governor of Sindh province and a close ally of Nawaz Sharif, the ousted prime minister, openly acknowledges the Chinese relationship is about more than economics.

“It gives China the security leverage they desperately need,” he says. “Obviously they want to compete with America, and want to make as many friends as possible on the way. They see [that] Pakistan is already facing the might of India – and India is politically very close to America, so China has a clear room for manoeuvre via Pakistan. They have global ambitions, and we have been their friends long before anyone else.

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“My only question to CPEC’s critics is, if we had not done CPEC, what option were you proposing? Are you saying we should go to complete power blackouts and the country should go into the stone age? When someone says CPEC favours the Chinese far more than Pakistan, of course that is the case, but that will always be the case between a lender and a borrower.”

The interior minister, Ahsan Iqbal, argues Pakistan had nowhere else to go. Saudi Arabia – to which the Pakistan military has just agreed to send another 1,000 troops – is the only alternative source of big cash.

The benefits to China are readily apparent, says Zubair: “It is sitting on tonnes of cash and needs to invest it. We are the obvious country for political and geographical reasons.”

Facebook Twitter Pinterest Billboards featuring Chinese president Xi Jinping, centre, with Pakistan’s president, Mamnoon Hussain, left, and former prime minister Nawaz Sharif welcome Xi to Islamabad in 2015. Photograph: Anjum Naveed/AP

In addition, Pakistan’s growing middle class represents a huge potential market for Chinese exports. Almost two-thirds of Pakistan’s 208 million people are aged under 30 and are driving demand in the fastest-growing retail market in the world.

Pakistan’s still underdeveloped agricultural system is ripe for Chinese investment; China also wants to develop its western provinces, and needs a transit route via Pakistan to import energy and raw material from the Middle East, the Horn of Africa and sub-Saharan Africa.

But CPEC may yet disappoint Pakistan. Husain Haqqani, the former Pakistan ambassador to the US and one of America’s diminishing band of Pakistani friends, says China has a history of predatory lending in developing countries that may not bode well for Pakistan.

In Sri Lanka, for example, China built a port at Hambantota but the revenues have been lower than expected and Sri Lanka has been unable to service the loans. In December, it agreed to hand the port over to two Chinese state-controlled entities.

In Pakistan, China also has the upper hand in a relationship already accounting for 46% of Pakistan’s trade deficit.

Facebook Twitter Pinterest Gwadar, and its deep water port, seen in the background, is the centrepiece of CPEC. Photograph: Akhtar Soomro/Reuters

Sirajuddin Aziz, president of the Habib Metropolitan bank, warned that CPEC should not become a vehicle to exclude other international investors. Countries such as Japan already complain that their efforts to build infrastructure in Pakistan now meet with Chinese resistance.

But the biggest question is whether Pakistan’s burgeoning defence relationship with China may one day extend to granting Beijing a military base on Pakistan’s soil – one from which China could intensify its strategic rivalry with India.

Jiwani, about 50 miles (80km) west of the better-known Gwadar port in Balochistan, has been most frequently mentioned as a possible site.

Gwadar’s great expectations

Gwadar itself, currently a small dusty fishing town 300 miles from Karachi, is the centrepiece of CPEC. In effect owned by the Chinese for the next 40 years, it will provide China with access to the Indian Ocean and the Arabian Sea.

After driving on a battered two-lane highway through scrub and past a scattered town, the road looks much like anywhere else in Balochistan, until the first signs emerge that one of the great economic gambles of Pakistan is drawing close: an increase in Pakistani police, then a convoy of Chinese luxury cars and finally the looming blue cranes of Gwadar port itself.

The Chinese cars, with Chinese flags, escorted by gun-carrying guards, turn right up the hill towards a five-star hotel populated by Chinese that sits at the top of the cliff overlooking the port. Below by the water’s edge stand the eight huge newly installed cranes, a business centre, a container area and the so-called Chinatown, a web of huts containing the Chinese workers who are effectively running the biggest deep water port in the area. A short boat ride out from the docks with the port managers towards the Arabian Sea reveals the sheer scale of the enterprise.

Facebook Twitter Pinterest Gwadar’s developing port, which will provide China with access to the Indian Ocean and the Arabian Sea. Photograph: Drazen Jorgic/Reuters

The director of marine operations, Captain Gul Muhammad, says the aim is to turn Gwadar into a city of one million people with the largest port in south Asia, two enterprise free-zones with 23-year tax holidays, liquified natural gas terminals with pipelines to Karachi (home to the largest international airport in Pakistan), and a multi-lane expressway heading north through Quetta and across 1,860 miles towards the Chinese border.

“From here, we can transform Pakistan. It will happen sooner than people think,” Muhammad promises.

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The speed of the plans to transform a fishing port may appear fantastical until you compare pictures of cities such as Doha today and 30 years ago. Then the pace of development, especially under Chinese direction, seems quite achievable, even if, right now, mundane issues such as sufficient drinking water are occupying the planners.



The local community – largely fishermen – fear being shut out of the development, and there seems to be an assumption that infrastructure investment is inherently a benefit. As Nawaz Sharif said during his visit to Gwadar in 2017 while he was still prime minister: “When roads are made, success follows.”

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