Key facts
- A PowerChina subsidiary has withdrawn from bidding on a major Pakistani electricity distribution company.
- Pakistan is seeking $2 billion from the Asian Development Bank (ADB) for the Main Line-1 (ML-1) railway upgrade.
- The ML-1 project was a cornerstone of the China-Pakistan Economic Corridor (CPEC).
- China's withdrawal is linked to Pakistan's economic instability and security risks.
- The ADB is also financing part of the Reko Diq copper and gold mine project.
China's enthusiasm for investing in Pakistan's power sector appears to be waning, with a subsidiary of PowerChina withdrawing from the race to acquire a major electricity distribution company. This move signals a significant decline in Chinese interest, despite long-standing ties through the Belt and Road Initiative (BRI).
Pakistan is now reportedly turning to the Asian Development Bank (ADB) for a $2 billion loan to fund a critical segment of its aging railway network, the Main Line-1 (ML-1) project. This project was initially envisioned as the centerpiece of the China-Pakistan Economic Corridor (CPEC), under which China had pledged approximately $60 billion for infrastructure. However, after years of stalled negotiations, Beijing has declined to finance the Karachi–Rohri segment of the ML-1, which spans roughly 1,800 kilometers from Karachi to Peshawar.
Reports suggest China's decision to disengage stems from concerns about the financial viability of the project, given Pakistan's deteriorating fiscal position and its difficulties in managing debt repayments, particularly to Chinese firms in the power sector. A broader recalibration of China's overseas investments, driven by its own economic challenges and reduced appetite for high-risk projects, is also a contributing factor. Persistent security concerns, including attacks on Chinese nationals in Pakistan, have further diminished the project's appeal.
The withdrawal marks a significant strategic recalibration for CPEC, which saw a flurry of activity between 2015 and 2019. While the Gwadar East Bay Expressway was completed in 2022, progress has since slowed, and unpaid dues to Chinese power producers have become a point of contention. The decision to involve the ADB in the ML-1 project could set a precedent for future infrastructure ventures.
The urgency to upgrade the ML-1 is amplified by the development of the Reko Diq copper and gold mine in Balochistan, one of the world's largest untapped mineral resources. The existing railway infrastructure is insufficient to support the expected volume of cargo from the mine, hindering its full economic potential. The ADB has also pledged $410 million toward the Reko Diq project, highlighting its increasing role in Pakistan's key development initiatives.