Economic engagement

AN array of investment MoUs valued at $7bn signed during Prime Minister Shehbaz Sharif’s China visit signifies Islamabad’s efforts to reposition its economic ties with Beijing. Instead of seeking infrastructure financing, Pakistan is now looking for investment-led cooperation for industrial relocation and export-oriented manufacturing, thus acknowledging its economic reality. The development model built around external borrowing, consumption-led growth and periodic balance-of-payments rescues has reached its limit. Pakistan today faces shrinking fiscal space, recurring dollar shortages, weakening exports and declining foreign investment. In that context, the PM’s statement seeking “investment, not loans or handouts” signals a recognition that sustainable economic recovery needs productive capital inflows, not handouts and debt.

China’s evolving economic structure may indeed create opportunities for us. As labour costs rise in China and industries move up the value chain with a focus on high-quality products, several lower-end manufacturing sectors such as textiles, light engineering and processing industries, are looking for competitive markets to relocate their production. Pakistan can be one such place. The proposition offered by Islamabad is this: Chinese firms relocate part of their capacity to Pakistan, enter into joint ventures with local businesses, utilise lower labour costs and export to regional and global markets. Agriculture is another area where Pakistan wants to collaborate with Beijing to boost exports. China imports around $100bn worth of agricultural products annually, yet Pakistan’s share remains negligible despite its physical proximity. Cooperation with China in agricultural technology, food processing and value-added exports could generate foreign exchange earnings while modernising domestic farming. The focus on mining also indicates Islamabad’s attempt to monetise its untapped natural resource base. Chinese interest in long-term commodity procurement and mining partnerships aligns with its broader strategy of securing global supply chains for industrial minerals and raw materials. For Pakistan, this could provide investment inflows. Yet the country’s past experience suggests that resource extraction without domestic value addition risks reinforcing dependency rather than generating sustainable industrial growth. Growing Pakistan-China economic ties show that despite global shifts, Beijing continues to view this country as an important economic and strategic partner. However, its willingness to expand investment will remain tied to Islamabad’s ability to provide security and stability to investors.

Published in Dawn, May 26th, 2026

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