China's FDI surge in Pakistan: Numbers, Sectors, and Stakes

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CWA # 1784

Global Politics Explainer

China's FDI surge in Pakistan: Numbers, Sectors, and Stakes

What do the number indicate? And what does that mean?

Vani Vyshnavi Jupudi
10 August 2025

What happened?
According to reports from Pakistan Today, Chinese foreign direct investments in Pakistan during fiscal year 2024-25 witnessed a ninety percent surge, reaching USD 1.22 billion, making China the source of 49.9 percent of all foreign investment in Pakistan.

The above numbers signal a deepening economic interdependence, but it also raises questions about whether Pakistan is achieving long-term capacity or sliding into a well-planned structural dependency. Will this partnership deliver mutual development, or will it raise unequal leverage?

China's FDI in Pakistan: What do the numbers indicate?
During 2024-25, China’s FDI investments in Pakistan jumped from USD 643.2 million to 1.22 billion. Including the reinvested earnings, the total inflow of capital stood at USD 1.7 billion, while the outflow stood at USD 485.5 million, indicating very active inter-company transactions and repatriation.

In June 2025, China’s investments including from Hong Kong (USD 470.1 million) constituted sixty-five percent of the total FDI in Pakistan. Other major investors like the UAE, Switzerland, and the UK lag far behind these numbers. The above numbers show the growth of capital and influence of China.

When did China start investing so heavily, and why?
China's economic engagement with Pakistan saw a steady growth post the launch of the China-Pakistan Economic Corridor (CPEC) in April 2015. During President Xi Jinping's visit, the corridor ratified the earlier developments under the Belt and Road Initiative (BRI) from the time of its launch in 2013.

Pakistan at that time was facing twenty-two-hour power cuts in the rural areas and a decline in investor confidence. This turned the Chinese investment into a lifeline for the country, as China presented itself as a steady economic partner that provided stability, which the country very much needed. For China, Pakistan offered three things: Gwadar Port, which will act as a gateway to the Arabian Sea, allows China to bypass the vulnerable Strait of Malacca; An opportunity to develop Xinjiang's economy; A strategic ally in a volatile region

During 2013-21, China committed USD 55.8 billion to Pakistan. In particular, during 2015-17, it reached USD 30 billion, equivalent to 20 percent of Pakistan's GDP at the time. This makes China's investments historic in Pakistan's modern economic history.

Sector-wise breakup: Where is China investing in Pakistan?
During 2024-25, Pakistan’s energy sector received the largest amount of Chinese investment in when it absorbed USD 1.17 billion. Within the above, the hydroelectric projects received USD 759.4 million to help Pakistan solve its power crisis. The energy sector includes the Sahiwal and Port Qasim coal-fired power plants together with the Quaid-e-Azam Solar Park and the major hydroelectric facilities Suki Kinari (870 MW) and Azad Pattan (700.7 MW). The investments have decreased power cuts but the unresolved issues of high electricity costs and rising power generation payment obligations persist.

Chinese financial services received 702.2 million dollars as the second biggest sector for their investments. The financial transactions between China and Pakistan and business operations of Chinese companies in Pakistan are the intended purpose of this investment.

Besides energy and finance, the electrical machinery sector received USD 176 million in investment while oil and gas received USD 123.5 million. Electronics received USD 95.9 dollars while information technology received USD 57 million.

Developing Gwadar infrastructure remains a priority with more than USD one billion allocated to expand the port facilities and related projects. The East Bay Expressway and Gwadar International Airport and a desalination plant represent the main developments to address water shortages in the area. The China-Pakistan Economic Corridor (CPEC) second phase focuses on building Special Economic Zones (SEZs) to enhance manufacturing capabilities and technology transfer. The priority Special Economic Zones consist of Dhabeji in Sindh and Rashakai in Khyber Pakhtunkhwa and Allama Iqbal Industrial City in Punjab. These initiatives face delays because of administrative problems and ongoing security threats.

What are the benefits and challenges?
Chinese FDI in Pakistan delivers concrete advantages. The investment has achieved three major outcomes by reducing power outages and enhancing transport infrastructure and generating more than 1,55,000 employment opportunities. The foreign exchange reserves of Pakistan have stabilized because China has provided Pakistan with billions of dollars through rollovers loans and trade finance.

However, the risks are equally pressing. The total external debt of Pakistan amounts to USD 29 billion constituting 22 percent of its total external debt. The IMF projects that China and Chinese banks hold about thirty percent of Pakistan's external debt which creates worries about "debt trap diplomacy." The potential exists for Pakistan to make policy concessions and transfer assets when it faces financial difficulties.

Security challenges are also intensifying. Baloch separatist groups especially the Balochistan Liberation Army have attacked CPEC projects and Chinese nationals . The deployment of 15,000 troops became necessary after several major incidents including the Karachi airport bombing to safeguard Chinese assets and personnel in Pakistan.

The public reaction against these developments continues to intensify. The "Gwadar Ko Haq Do" (Give Rights to Gwadar) movement fights for local communities to receive better access to electricity and water services and employment opportunities. Activists claim that Chinese projects deliver most benefits to external parties instead of providing fair opportunities to local communities. Political resentment continues to grow because of problems related to illegal trawling and land acquisition and surveillance activities.

Moreover, technology transfer has remained minimal. The practice of Chinese firms importing their equipment and labor prevents Pakistani workers from developing new skills. Major projects controlled by Chinese companies have blocked the growth of local businesses and their ability to compete in the market. The rising Pakistani-Chinese partnership restricts former ability to make foreign policy choices because of the escalating US-China tensions. The CPEC route through Gilgit-Baltistan faces opposition from India because it passes through disputed territory which adds more complexity to the geopolitical situation.

What next?
The increasing Chinese investment in Pakistan transforms its infrastructure and energy systems and financial networks while affecting its strategic decision-making process. The impressive investment figures have implications that extend beyond economic considerations. The partnership between Pakistan and China will continue, but the real challenge lies in transforming this relationship into genuine capacity development instead of creating dependency.

The forthcoming CPEC phase requires Pakistan to take full control of its policies and people and long-term vision. The construction of roads by China requires Pakistan to determine their final destinations.

References
â€‡1.â â Gwadar Pro. (2025, July 19). China’s net FDI in Pakistan soars 90% to $1.22 bln in FY 2024-25. https://www.gwadarpro.pk/1946726565527621633/chinas-net-fdi-in-pakistan-soars-90-to-$122-bln-in-fy-2024-25
â€‡2.â â CPEC Info. (2025, July 21). China’s net FDI in Pakistan soars 90pc to $1.22b in FY2024-25. https://cpecinfo.com/chinas-net-fdi-in-pakistan-soars-90pc-to-1-22b-in-fy2024-25/
â€‡3.â â Pakistan Today. (2025, July 20). Pakistan sees 90pc rise in net FDI from China reaching $1.22bn in FY25. https://www.pakistantoday.com.pk/2025/07/20/pakistan-sees-90pc-rise-in-net-fdi-from-china-reaching-1-22bn-in-fy25/
â€‡4.â â State Bank of Pakistan. (2025). Foreign direct investment bulletin, FY 2024–25 (Monthly FDI Bulletin, June 2025). https://www.sbp.org.pk/ecodata/NetinflowSummary.pdf
â€‡5.â â The Nation. (2025, July 21). China’s net FDI in Pakistan soars 90pc to USD 1.22b in FY2024-25. https://www.nation.com.pk/21-Jul-2025/china-s-net-fdi-in-pakistan-soars-90pc-to-dollar-1-22b-in-fy2024-25
â€‡6.â â Economic Times. (2025). China assures Pak $3.7 billion loan to keep foreign exchange reserves in double digits. https://economictimes.com/news/international/world-news/china-assures-pak-usd-3-7-billion-loan-to-keep-foreign-exchange-reserves-in-double-digits/articleshow/121468108.cms
â€‡7.â â Dawn News. (2025). China accounts for nearly half of Pakistan’s total FDI inflows in FY 2024–25. https://www.dawn.com/news/1844305
â€‡8.â â Sustainable Development Policy Institute (SDPI). (2025). CPEC emerges as catalyst for investment and technology transfer: Gillani. https://sdpi.org/cpec-emerges-as-catalyst-for-investment-technology-transfer-gillani-/news_detail
â€‡9.â â Brookings Institution. (2025). Power less Pakistan: energy crisis and China’s role. https://www.brookings.edu/articles/power-less-pakistan/
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13.â â The Diplomat. (2025, January). China in Pakistan’s power sector: The hidden costs behind Pakistan’s energy overcapacity. https://thediplomat.com/2025/01/china-in-pakistans-power-sector-the-hidden-costs-behind-pakistans-energy-overcapacity/
14.â â Atlantic Council. (2025). With Pakistan’s economy in freefall, Chinese economic and military influence is likely to grow. https://www.atlanticcouncil.org/blogs/southasiasource/with-pakistans-economy-in-freefall-chinese-economic-and-military-influence-is-likely-to-grow-in-the-country/
15.â â Chatham House. (2025, July). China–Pakistan relations and geopolitical dynamics in South Asia. https://www.chathamhouse.org/2025/07/china-eu-summit-unlikely-improve-relations-amid-key-differences-trade-and-ukraine-war
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17.â â Business Recorder. (2025). Pakistan–China ink technology transfer and labour training deal. https://www.brecorder.com/news/40366867/pakistan-china-ink-technology-transfer-labour-training-deal
18.â â VOANews. (2025). Pakistan pushes for expansion of China’s BRI plans. https://www.voanews.com/a/pakistan-pushes-for-expansion-of-china-s-bri-plans/7824296.html
19.â â Indian Defense News. (2025, March). Are Chinese investments in Balochistan fueling unrest? https://www.indiandefensenews.in/2025/03/are-chinese-investments-in-balochistan.html
20.â â CEIC Data. (2025). Pakistan Foreign Investment: Direct Investment: Outflow: China. https://www.ceicdata.com/en/pakistan/foreign-investment/foreign-investment-direct-investment-outflow-china
21.â â China Briefing. (2025, June 17). China’s January-April 2025 FDI Data: Trends and Sectoral Analysis. https://www.china-briefing.com/news/chinas-january-april-2025-fdi-data-trends-sectoral-and-regional-analysis/
22.â â Organization of Islamic Cooperation Chamber of Commerce and Industry (OICCI). (2025). Pakistan’s FDI Pulse (March 2025). https://www.oicci.org/app/media/2025/04/FDI-Mar-25.pdf
23.â â Center for Strategic and International Studies (CSIS). (2025). China-Pakistan Economic Corridor: Strategic motivations and regional impact. https://www.csis.org/analysis/china-pakistan-economic-corridor-five
24.â â Sustainable Development Policy Institute (SDPI). (2025). Report on Chinese investments and economic impacts in Pakistan. https://sdpi.org
25.â â International Energy Finance Agency (IEEFA). (2025). Pakistan must rebuild Chinese investor confidence in its energy transition. https://ieefa.org/resources/pakistan-must-rebuild-chinese-investor-confidence-its-energy-transition
26.â â China Customs. (2025). China-Pakistan trade data 2024. https://www.china-briefing.com/news/china-pakistan-relations-trade-investment-strategy/
27.â â Asian Institute of Research. (2025). CPEC 2.0 and Special Economic Zones: Analyzing regulatory frameworks for Chinese investors in Pakistan. https://www.asianinstituteofresearch.org/JSParchives/cpec-2.0-and-special-economic-zones:-analyzing-the-existing-regulatory-framework-for-chinese-investors-in-pakistan
28.â â Strategic Studies Institute, Islamabad (ISSI). (2025). Issue brief on Pakistan’s energy crisis and CPEC challenges. https://issi.org.pk/issue-brief-on-pakistans-energy-crisis-challenges-and-path-forward/

About the author
Vani Vyshnavi Jupudi is an undergraduate student at CHRIST (Deemed to be university) BGR campus, currently pursuing her degree under the Department of International Studies, Political Science and History.

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