China’s relationship with Pakistan is crucial to its strategic goals. China, through its China–Pakistan Economic Corridor (CPEC)—the flagship project of the Belt and Road Initiative (BRI)—has invested heavily in Pakistan and is integrating Pakistan’s economy with its own. However, Pakistan is still reeling under the weight of its substantial, $100 billion debt, one-third of which is to China.
Despite these economic hardships, Pakistan signed $10 billion worth of trade agreements with China, aiming to promote agriculture, textile, food, and car parts exports. The countries also began operating an international road transport route connecting Xinjiang in China with Islamabad in Pakistan. However, the benefits have not translated into improved economic conditions for Pakistan, which has continued to deteriorate, with high inflation and increased poverty rates.
Even as Pakistan struggles economically, its closeness with China has served to damage its relationship with the United States. Pakistan’s relationship with China is becoming increasingly critical and such that the U.S. will find it difficult to persuade Pakistan to lessen its ties with Beijing. Though Pakistan has shown interest in more American economic investment, for that to happen Pakistan would need to provide a favorable economic environment.
China’s investment in Pakistan is aimed at countering India, and one of the key obstacles to improving relations between India and Pakistan is the Pakistani military-intelligence establishment. Despite this, the U.S. continues to encourage both India and Pakistan to increase their bilateral trade.