The Chinese investment in Pakistan has decreased by 10 percent during the fiscal year 2019-20 (FY20) and fiscal year 2020-21 (FY21).
The decrease in Chinese investment in the last two years is partly due to the conclusion of the China-Pakistan Economic Corridor (CPEC) Phase-I, which has impacted the outlay of Chinese investment.
During the previous government’s tenure, CPEC was not assigned high priority in either allocation of resources or implementation. The creation of the CPEC Authority created confusion and duplication in the functions of ministries and departments.
Most of the early harvest projects under the first phase of CPEC relating to power and infrastructure have been completed and CPEC has entered the second phase (2020–2025), which focuses on industrial cooperation which is a long-term endeavor and dependent on industrialization through industrial relocation from China, particularly in the Special Economic Zones (SEZs). Meanwhile, sites for nine SEZs were identified but not a single SEZ was completed while work on five SEZs was never started.
The decrease in Chinese investment in the last two years is also due to a decrease in the Foreign Direct Investment (FDI) inflows in the manufacturing sector, with electrical machinery (-36.41 percent) and ceramics (-63.83 percent) being the top two sectors with major decline.
Similarly, the COVID-19 outbreak caused a sharp decline in global economic activity and impacted the pace of CPEC, thus impacting the overall net FDI.
However, the country-wise FDI data shows that China still has the largest share of foreign investment in Pakistan.
