By Syeda Zainab Gilani
For more than a decade, the China–Pakistan Economic Corridor (CPEC) has been a defining feature of Pakistan’s economic relationship with China. Its first phase prioritised energy generation, transport infrastructure, connectivity, and the development of Gwadar, helping address constraints that had long limited economic activity. As the partnership enters its next phase, however, a more consequential question emerges: how can these investments translate into a stronger and more competitive Pakistani economy?
The answer lies in industrialisation. Pakistan now needs to move beyond building the foundations of economic activity and focus on expanding the productive capacity those foundations were intended to support.
CPEC 2.0 offers an opportunity to connect infrastructure with industrial development, agricultural modernisation, technological cooperation, and export growth. The key challenge is to ensure that these priorities produce tangible economic outcomes rather than remain a list of ambitions.
CPEC’s first phase helped address important infrastructure and energy constraints. Reliable electricity and improved transport links are essential for manufacturing, investment, and trade. Without them, businesses face higher costs and struggle to compete. These achievements form an important part of the corridor’s legacy. Yet infrastructure, however necessary, is not sufficient to transform an economy.
A highway can improve the movement of goods without increasing Pakistan’s production. A port can facilitate maritime trade without creating a competitive export industry. An industrial zone can provide land and facilities without ensuring that businesses establish sustainable operations.
This distinction should shape the next phase of the partnership. Pakistan has invested in important economic assets; the priority now is to make those assets more productive. The World Bank’s research on Pakistan’s regional connectivity highlights the importance of complementary reforms, including more efficient customs procedures, lower trade costs, and stronger regional links, if infrastructure investment is to translate into wider economic gains.
The next stage should therefore be judged by what Pakistan can produce and sell, how efficiently its businesses operate, and whether domestic firms become more competitive.
The Pakistan–China Action Plan for 2025–2029, CPEC 2.0, prioritises industrial cooperation, special economic zones, agriculture, IT, and innovation. To turn these ambitions into results, Pakistan must attract competitive businesses that boost productivity, adopt modern technologies, and produce higher-value goods.
Pakistan’s approval of Karachi Industrial Park as a special economic zone on October 23, 2026, highlights renewed industrial ambitions. Its success will depend on attracting businesses, creating jobs, and boosting exports, particularly in textiles, agricultural processing, engineering, electronics, and IT services.
The aim should not be to pursue every sector at once. Pakistan should prioritise commercially viable industries and develop the skills, infrastructure, and supplier networks needed to support them. Special economic zones should be judged not by their size or number, but by the businesses they attract, jobs they create, exports they generate, and opportunities they provide for local suppliers.
Pakistan’s export challenge makes this shift particularly important. As the Pakistan Institute of Development Economics notes, CPEC investment must be supported by reforms to achieve sustained growth. Cooperation with Chinese enterprises can strengthen Pakistan’s technological capabilities, but foreign investment alone does not guarantee technology transfer or build the skills of local workers and suppliers. CPEC 2.0 should promote knowledge transfer alongside production. Joint ventures can support technical training, supplier development, and university–industry partnerships, while technical institutes and researchers can help businesses address practical manufacturing and agricultural challenges
For Pakistan’s young workforce, this could create opportunities to acquire skills relevant to a modernising economy. For domestic businesses, it could provide pathways to better production methods, stronger supply chains, and more sophisticated products. The objective is not immediate technological independence, but a gradual and measurable improvement in the country’s ability to absorb, apply, and eventually develop technology.
The real value of an industrial partnership lies not only in what it produces today, but also in what the country becomes capable of producing tomorrow.
Pakistan and China should transparently assess industrial cooperation through operational projects, jobs, exports, local supplier participation, and workforce training. Governments, businesses, universities, and research institutions must work together, supported by predictable regulations, reliable utilities, efficient customs, and access to finance.
CPEC’s first phase laid important foundations. The next must deliver stronger Pakistani businesses, more competitive exports, skilled workers, and lasting industrial capacity. Ultimately, CPEC 2.0 should be judged by how effectively it turns investment into sustained economic growth.