By Nathan Balis

The China-Pakistan Economic Corridor (CPEC) — the $62 billion flagship project of China’s Belt and Road Initiative (BRI) — entered its second phase late last year, dubbed CPEC 2.0. Designed to connect Pakistan’s Gwadar and Karachi ports to China’s Xinjiang Uyghur Autonomous Region, CPEC has been one of Beijing’s most ambitious geoeconomic undertakings. For China, it offers strategic access to the Arabian Sea; for Pakistan, a potential route out of economic stagnation. This analysis examines how the launch of CPEC 2.0 signals China’s continued commitment to the project despite Pakistan’s rising political instability, economic fragility, and internal resistance — all of which test the corridor’s long-term sustainability.

Historical Background:

Few bilateral relationships rival the strategic depth of China and Pakistan’s. Islamabad was among the first to recognize the People’s Republic of China and one of only two nations to stand by Beijing after the 1989 Tiananmen Square crackdown. The two have consistently backed each other’s positions — from Kashmir and Xinjiang to Taiwan and Tibet — forging a political alignment that laid the groundwork for CPEC’s birth in April 2015.

This relationship provided the foundation for CPEC’s inception, when Chinese President Xi Jinping unveiled his “1+4” vision for Pakistan, focusing on improving Gwadar Port, energy and transportation infrastructure, and industrial cooperation. These initiatives directly addressed Pakistan’s chronic energy shortages and sought to improve highway access to its ports, particularly from Pakistan’s underdeveloped western regions. Key achievements thus far have included the development and construction of Gwadar’s seaport and airport, over 8,000 megawatts of additional power capacity through multiple power plants, and an extensive road network spanning nearly 1,000 kilometers.

CPEC 1.0 and Its Strategic Logic

CPEC serves multiple strategic aims for China. First and foremost, it provides a shorter, land-based alternative to import oil from the Middle East via Gwadar Port, reducing China’s dependency on the Strait of Malacca — a vulnerable chokepoint that sees 80% of its energy imports and could be blockaded in a potential conflict with the U.S. or India. Known as the “Malacca Dilemma,” this dependency has long troubled Chinese strategists.

The corridor also advances China’s internal goals. Economic integration of the Xinjiang region via CPEC is seen as a soft power method to stabilize it and reduce separatist sentiments. Externally, CPEC enhances China’s commercial and naval reach into the Indian Ocean. It supports China’s broader String of Pearls strategy — building a network of commercial and military assets across the Indian Ocean to project power and secure sea lanes.

For Pakistan, CPEC has been marketed as an economic game-changer. It has improved infrastructure, addressed electricity shortages, created hundreds of thousands of jobs, and expanded regional connectivity with Central Asia. Yet concerns remain. Beijing has grown wary of the Pakistan Army’s increasing control over CPEC execution, which raises fears of militarized economic policy. Moreover, insurgents in the Pakistani province of Balochistan have attacked Chinese assets, viewing the project as neo-colonial and exploitative. Financially, Pakistan’s mounting debt burden, of which China is the largest bilateral creditor, has raised alarms. As of 2024, approximately 22% of Pakistan’s $131 billion external debt is owed to China, according to the IMF. Although both governments deny it, Pakistan’s financial dependence has fueled accusations of Chinese debt-trap diplomacy, where opaque loans and economic leverage provide Beijing with disproportionate strategic influence.

CPEC 2.0: New Goals, Same Stakes

Despite these challenges, China is doubling down. CPEC 2.0 marks a strategic pivot from basic infrastructure development to higher-value economic integration through:

–   Developing Special Economic Zones (SEZs) to boost manufacturing, exports, and attract foreign direct investment (FDI) into Pakistan.

–   Facilitating technology transfer to modernize Pakistan’s agricultural sector and increase value-added exports to China.

–   Expanding fiber-optic and digital infrastructure to link Pakistan to China’s Digital Silk Road.

–   Introducing public-private partnerships (PPPs) and local financing to reduce debt dependence on Chinese state loans.

This shift mirrors China’s evolving geoeconomic toolkit: rather than just building infrastructure, it now seeks to shape entire ecosystems of industrial and technological development. As of 2023, bilateral trade between China and Pakistan stood at $23 billion, with China as Pakistan’s largest trading partner and biggest source of imports — further deepening economic interdependence.

However, major questions remain. Pakistan’s political system, being plagued by military dominance and bureaucratic inefficiency, has historically struggled to manage complex reforms. Whether it can effectively oversee SEZs under CPEC 2.0 remains doubtful. Past efforts have faltered due to land disputes, bureaucratic gridlock, and lack of local buy-in. Likewise, the promise of genuine tech transfer often falls short in China’s BRI projects, raising doubts about the long-term industrial benefit for Pakistan.

Regional Implications

By committing to CPEC’s second phase, Beijing has signaled that it views the corridor as a critical geoeconomic opportunity with far-reaching regional implications:

1. Mitigating the Malacca Dilemma

China has thus far been unable to effectively solve its Malacca Dilemma, where rising tensions in Taiwan and the South China Sea have only emphasized the chokepoint’s importance. CPEC 2.0 demonstrates the premium Chinese strategists place on diversifying trade, military, and logistical routes through friendly territory.

CPEC’s significance is further elevated when compared to other faltering alternatives. While the China–Myanmar Economic Corridor (CMEC) once offered a similar path, Myanmar’s 2021 military coup and subsequent instability have slowed progress dramatically. In contrast, despite Pakistan’s volatility, CPEC now stands as China’s most viable westward corridor, offering strategic redundancy and trade security. It demonstrates the increasing importance the CCP places on solving the Malacca Dilemma and developing alternative economic networks.

2. Check on India

India views CPEC as a violation of its sovereignty, since parts of the corridor pass through Gilgit-Baltistan, a disputed region in Jammu and Kashmir. China’s persistent development in this area reinforces Pakistan’s territorial claims, undermines India’s position in bilateral and multilateral forums, and forces India to militarize its northern frontiers, draining strategic bandwidth.

Furthermore, China’s deepening stake in Pakistan’s economy gives Beijing a veto-like influence over Islamabad’s India policy. CPEC 2.0 thus emphasizes its function as a geopolitical buffer zone, constraining India’s freedom of maneuver both regionally and globally.

3. Countering the U.S. Indo-Pacific Strategy

CPEC is also China’s counterweight to the U.S. Indo-Pacific Strategy (IPS), the Quad alliance, and the newly announced India–Middle East–Europe Corridor (IMEC). China aims to promote a regional China-centric trade and logistics network that challenges the dominance of U.S.-backed trade corridors, while its Digital Silk Road initiatives divert countries from U.S.-led tech ecosystems.

Finally, the continuing development of Gwadar Port further raises U.S. concerns over the potential future logistics or dual-use naval base for the Chinese navy (PLAN). This would give China a strategic node in the Indian Ocean that would directly challenge the U.S. 5th Fleet based in Bahrain and Diego Garcia — particularly given its proximity to the Strait of Hormuz, another vital choke point of global shipping.

Conclusion

While CPEC has thus far exemplified the CCP’s geoeconomic strategy through the BRI, the launch of its second phase in 2024 underscores a renewed and evolving set of strategic objectives. Its renewed momentum quashes speculation of Chinese retreat and underscores Beijing’s strategic calculus in the region: to secure access to the Arabian Sea, check Indian influence, and counter the U.S.’s presence in the region.

CPEC has already delivered tangible economic gains for Pakistan — from power generation to port development — and shows no signs of slowing, despite mounting debt concerns and local unrest. In fact, China’s willingness to continue investing amid instability may reflect the very logic of its so-called debt-trap diplomacy: creating long-term political leverage through economic dependency.

Understanding China’s evolving relationship with Pakistan — and the deeper logic behind CPEC’s expansion — is essential for evaluating both regional dynamics and the future of geoeconomic competition across Asia.

By Nathan Balis 

During the last two decades, China has outpaced the U.S. in Africa, building a vast economic footprint through trade, investment, and infrastructure. While Beijing’s engagement is slowing, Washington’s response remains tepid — risking a long-term loss of influence on the continent. The Biden administration has taken steps in the right direction, increasing engagement and investment, but these efforts remain insufficient. Meanwhile, a return to the transactional foreign policy of the Trump era — marked by skepticism of long-term development aid and attacks on USAID — would only weaken America’s ability to build lasting economic partnerships on the continent. To compete effectively, the U.S. must commit to sustained, strategic investment that fosters genuine economic growth and stability in Africa.

In 2000, General Secretary Jiang Zemin of the Chinese Communist Party (CCP) announced the Go Out policy as a national strategy, incentivizing its enterprises to invest overseas. In 2013, Xi Jinping launched the Belt and Road Initiative (BRI), seeking to establish global trade routes, including in Africa, by investing in infrastructure projects such as railways, ports, highways, and energy facilities. In addition, the Forum on China-Africa Cooperation (FOCAC) has met every three years since 2000, creating three-year action plans that include Chinese pledges of loans, grants, and export credits.

China is now sub-Saharan Africa’s largest bilateral trading partner, with 20% of the region’s exports going to China and about 16% of imports coming from China, according to the International Monetary Fund (IMF). Simultaneously, China has become the largest bilateral creditor to Africa. China’s share of total sub-Saharan African external public debt grew from 2% before 2005 to 17% by 2021, according to the World Bank. Furthermore, China’s foreign direct investment (FDI) in the region has surged, accounting for nearly 23% of annual FDI inflows in 2021. Through three principal geoeconomic instruments — trade, investment and credit — China has achieved a staggering level of influence across the continent.

Yet since 2017, Beijing’s economic engagement with Africa has lost momentum. China’s lending to sub-Saharan Africa has dwindled, dropping from nearly $29 billion in 2016 to under $1 billion in 2022—its lowest level in two decades. A struggling real estate sector, demographic pressures, and external shocks like COVID-19 and trade tariffs have all weighed on growth. The slowdown has consequences: the IMF estimates that a one percentage point dip in China’s growth rate drags Africa’s average growth down by 0.25 points within a year. Additionally, China’s shift toward green energy and Russian oil is squeezing African exporters by reshaping trade flows.

This shift presents the U.S. with an opening to expand its economic presence in Africa while promoting better lending standards and financial transparency. Chinese lending to the region increasingly undermines debt transparency, including terms that bar debtors from revealing terms or even the existence of certain loans. Debt transparency is crucial to mitigating risks of armed conflicts, trade fragmentation, inflation, and weak growth. Additionally, China frequently retains the right to demand repayment at any time, enabling its use of funding as diplomatic leverage.

With China retreating from major infrastructure projects, Washington has a prime opportunity to step in. The Carnegie Endowment for International Peace (CEIP) has identified three key sectors — health, clean energy, and transportation — where the U.S. could make the most impact. Strategic investments in these sectors would not only support Africa’s development priorities but also reinforce America’s economic leadership by:

1.    Leveraging the Development Finance Corporation (DFC): By offering better financing terms for African governments and businesses, the U.S. would unlock investment in sectors where Chinese engagement has slowed, such as infrastructure.

2.    Strengthening trade partnerships: The African Continental Free Trade Area represents a massive opportunity. Washington should explore ways to align U.S. trade policy with Africa’s regional trade initiatives and diversification objectives more closely.

3.    Developing early-stage pipelines: Unlike China’s state-driven economic model, U.S. firms often struggle to find viable, well-structured projects. Early-stage collaboration with African governments could improve project pipelines and create more opportunities for U.S. private-sector investment.

4.    Scaling up health and humanitarian assistance: Expanding programs in vaccine distribution and medical infrastructure strengthens diplomatic and cultural ties while opening doors for economic collaboration.

President Biden’s recent visit to Angola and his administration’s $600 million railway investment mark a step in the right direction but remain negligible compared to China’s multi-billion-dollar commitments. U.S.-Africa trade, currently valued at $69 billion, still lags far behind China-Africa trade, which stands at $262 billion.

Despite Trump’s late-term embrace of foreign aid, most notably through the creation of the DFC, his recent attacks on USAID and unnecessary antagonization toward the South African government are strategic missteps. The abrupt termination of numerous global programs, including critical health initiatives in countries like Uganda, undermines U.S. soft power and creates a void that Beijing is eager to fill. As China’s influence grows, African nations have increasingly aligned with it on key global issues, such as Taiwan, with 53 of 54 African nations recently signing a joint statement supporting China’s reunification efforts. If Washington hopes to maintain support and credibility in global conflicts, it must recognize that economic leadership in Africa is not just about development; it’s about securing partnerships in an era of intensifying great-power competition.

By Owen Miller

Since Russia’s forceful annexation of Crimea and the advent of the Russo-Ukrainian War in 2014, Western powers have been continuously sanctioning Russian goods and finances. When Russian forces directly invaded Ukraine in a major escalation in 2022, Western governments promised economic sanctions that would cripple the Russian economy. Many government officials called it an economic “nuclear bomb” that would send the entire country into free-fall. Two years later, Ukraine is still fighting for its sovereignty and the Russian economy has not seen the collapse that much of the world has hoped for. Russian President Vladimir Putin has repeatedly said that Russia has had plenty of growth, while Europe is disproportionately suffering from sanctions. With much of their pre-war exports and finances sanctioned, how realistic is Russia’s supposed economic health?

Pre-invasion, energy exports to the European Union and the U.S. were a cornerstone of the Russian economy. Many analysts attributed Russia’s energy export to a form of Dutch disease, where a major part of a country’s economy is dependent on one sector. In 2021, about 20% of Russia’s GDP was attributed to energy exports. At the beginning of Russia’s invasion of Ukraine, global energy prices soared, and Russian companies saw a surge in energy profits as Europe remained dependent on Russian energy. However, these tailwinds were short-lived. Western powers quickly diversified their energy imports away from Russia and sanctioned Russian industries. As a response, Russia turned eastward, shifting its exports to countries such as China, Turkey, and India, who were all ready to take advantage of cheap Russian energy. Despite this strategic realignment to non-Western customers, government revenues from energy exports have still decreased by over 40% since 2022, as the value of the lost European market has not been fully replaced.

In addition to sanctions on energy exports, Russia’s financial system was effectively cut off from the global economy. In 2022, most Russian banks were banned from using the international Society for Worldwide Interbank Financial Telecommunications (SWIFT) payment system, and Russia lost access to US dollars and other key global currencies. As a result, Russia has had to turn to conducting international trade in Russian rubles and Chinese yuan. The ruble has experienced high volatility, which is a weight on the Russian economy as consumers and businesses lose faith in Russian financial institutions. This instability, combined with handling trade in uncommonly used currencies, has made Russian imports and domestic business harder to conduct due to higher premiums and costs.

The war and the compounding effects of sanctions have led the Russian government to adopt increasingly unsustainable fiscal policies. At first glance, Russia’s reported GDP growth of 3% for 2024 seems promising, but the vast majority of this growth is a result of massive government military spending. This spending is not conducive to long-term growth and stability. Military spending is chewing into Russia’s emergency reserves and leaving the country vulnerable to an economic downturn. 

Furthermore, military spending is now over a third of all government expenditures, while government revenue from energy and trade is massively down. As a result, the government is running a large deficit and using emergency reserves, such as the National Wealth Fund, to cover for its losses. These are quickly being depleted, and thanks to U.S. and E.U. sanctions, $300 billion in Russian sovereign reserves – nearly half of all Russian reserves pre-war – have been confiscated. Combined, Russian deficit spending and the depletion of their reserves have  led to very high inflation rates. Russian consumers will experience a nearly 7% inflation rate this fiscal year, which is about double the pre-war amount. Russia’s ability to finance itself has been cratered by sanctions, which is detrimental to its long term growth and consumer health.

Sanctions against Russia have fallen short of the impact many had anticipated, but they have succeeded in cutting off large portions of the Russian economy from the rest of the world. Additionally, sanctions have made domestic business operations increasingly difficult. The government’s massive expenditures are propping up the short-term economy, but they are unlikely to translate into sustainable long-term growth. Therefore, despite sanctions not having the magnitude of predicted effect, they are still having a noticeable negative impact on the long-term prospects of the Russian economy.

Sources

https://www.wilsoncenter.org/blog-post/sanctions-are-working-just-ask-russias-friends

https://www.brookings.edu/events/sanctions-on-russia-whats-working-whats-not/

https://www.cfr.org/in-brief/two-years-war-ukraine-are-sanctions-against-russia-making-difference

https://wits.worldbank.org/CountryProfile/en/Country/RUS/Year/LTST/TradeFlow/E

xport/Partner/by-country/Product/27-27_Fuels