The Belt and Road Initiative is over ten years old now, and in Pakistan, there’s less to show than what each side promised in the 2010s. Midway through the next decade, what will come of the lofty ambitions of each growing nation?
Pakistan’s economic relations with China are taking a nosedive. This is evident from how Pakistan’s largest Belt and Road project is finally moving ahead. It's not the Chinese funding, but U.S.-backed Asian Development Bank (ADB) funding, which has pumped life into this long-stalled project.
The project in question is the Main Line - 1 (ML-1), the largest project of the China-Pakistan Economic Corridor (CPEC), a $50 billion Pakistani portion of the Belt and Road. With a total cost of $6.7 billion, the project entails upgrading the 1,726-kilometer railway that connects Karachi, on the Arabian Sea coast, and Peshawar, in northwestern Pakistan.
This project has been under consideration since 2015, when Chinese President Xi Jinping visited Islamabad to sign Belt and Road deals in Pakistan. However, it could not move forward due to disagreement on funding volume and mode between Pakistan and China.
During his visit to Pakistan in August 2025, Chinese Foreign Minister Wang Yi said that Beijing has no problem with third parties stepping in to fund ML-1, giving an apparent go-ahead for Pakistan to seek out alternative financiers for the project. After this announcement, ABD came into the mix. ADB is a Manila-based global development lender, which happens to list the U.S. and its allies among its largest shareholders.
The latest statement by Chinese Foreign Minister Yi on ML-1 funding was a clear indication that Beijing has backtracked from its position in 2017 that it wants to be the sole financier of ML-1. In response, the government of Pakistan has now returned to the ADB, which was keen to fund in 2017 but withdrew due to Beijing's insistence on sole financing.
This latest development is a surprising about-face from the stance Beijing held when the ML-1 project was made public. In 2017, Ahsan Iqbal, then-Planning Minister, told the media that Pakistan had declined an ADB offer to fund the ML-1 as China wanted to singlehandedly finance the railway upgrade. Pakistan waited almost a decade for China's 85% financing commitment for the project, which never came.
Pakistan initially asked ADB to lend $7 billion for ML-1. However, ADB has made it known they’re only willing to fund $2 billion for the project for time-being. Out of this, ADB has agreed to pay $10 million for Project Readiness Financing of the project. The loans provided by ADB for ML-1 will be much costlier than if similar loans were provided by China under the Belt and Road. Still, the project will kick off with the help of ADB loans, and that seems to be the priority for Pakistan.
This begs the question of why Beijing allowed ADB to fund ML-1. What changed between 2017 and now that forced Beijing to allow Western financial institutions to be a part of a major Belt and Road project? The answer lies in the growing frustration of China with Pakistan involving its CPEC projects over the course of the last 10 years.
First, China invested over $21 billion in installing power projects in Pakistan under CPEC. These projects came at a time when Pakistan was undergoing a severe power shortage. Although costly, these power projects helped resolve the power crisis in Pakistan. Since then, these projects have been generating electricity in Pakistan, but the Chinese companies that are operating them are not being paid on time. Pakistan still owes more than $1.5 billion to Chinese power producers. This has resulted in Pakistan earning the displeasure of Beijing on multiple occasions. However, the problem of timely payment and clearing pending dues remains unresolved.
Secondly, China has valid concerns over the safety of its citizens in Pakistan. Chinese citizens have been subject to targeted violence in Balochistan and Khyber Pakhtunkhwa, two provinces bordering Afghanistan. Since 2021, 21 Chinese nationals have been killed in Pakistan. Security of Chinese nationals has been one of the topmost agenda points in recent top-level meetings between Chinese leadership and their Pakistani counterparts. China feels that Pakistan has failed to protect its citizens despite repeated attacks, and this has contributed to increasing Chinese frustrations with their Pakistani allies.
Furthermore, Chinese nationals are also irked by the restrictions placed on them by Pakistani government officials in the name of security. Last year, six Chinese nationals filed a petition against harassment and restrictions on their movement in the name of security issues in Karachi city. If Chinese nationals can’t move freely, then they can’t do business freely, and this goes against the very reason they would come to Pakistan. Therefore, for obvious reasons, Beijing will not increase economic engagement with Pakistan under the present circumstances.
Moreover, the withdrawal of China from ML-1 and the entry of U.S.-backed institutions will have strong implications on the Belt and Road projects in Pakistan. Beijing has multiple Initiative-associated projects which have already been completed. It will not withdraw from the Gwadar port and other existing projects, as they wish to recoup their investments and save face for the Belt and Road’s future prospects. However, the handover of the ML-1 may be a quiet sign that Beijing will not make any major investments or lend money to projects in Pakistan anymore.
China’s influence in Pakistan was meant to create investment opportunities in South Asia and help provide access to the Indian Ocean for Beijing. Instead, by now cutting funding back, it has created a vacuum, which is being filled by U.S.-led institutions. This loss of influence will eventually translate into Beijing losing further economic space to the U.S. in Pakistan. Moving forward, Beijing-Islamabad relations will only focus on defense cooperation, which hints at a failure of economic cooperation between both countries.
Pakistan’s economy is struggling to regain sustained growth while facing heavy external debt repayments, making fresh foreign investment increasingly important. In that context, China’s retreat from the scale of investment seen during the early years of CPEC is a significant setback. CPEC initially brought Pakistan badly needed infrastructure financing and investment, but problems with cases like ML-1 are weighing on Beijing’s appetite for new commitments. That is far from the outcome Islamabad had hoped for when it embraced CPEC as the center of its economic partnership with China.
The bigger problem is that no alternative source of investment has emerged at a comparable scale. The U.S. and other Western countries have shown some interest, particularly in Pakistan’s mineral sector, but so far nothing approaching the scale of China’s engagement under CPEC. Pakistan therefore faces a difficult transition where its largest source of major foreign investment is becoming more cautious, while potential alternatives remain limited. In the short term, that leaves Islamabad with few options for attracting the scale of capital its economy needs.
