CPEC and Structural Economic Dependence: A Dependency Theory Analysis of Chinese FDI and Pakistan’s Growth Trajectory (2020-2025)

Abstract

This paper analyzes the economic consequences of the Chinese investment in Pakistan within the framework of the China-Pakistan Economic Corridor (CPEC) between the years 2020 and 2025 The results show that Chinese FDI has emerged as the major source of foreign capital and thus restrict diversification of investments and reduce bargaining power of Pakistan. Sectoral patterns indicate a strong focus on investment in the energy and transport infrastructure, whereas the pace at which Special Economic Zones (SEZs) are being developed is very slow and the shift to productivity-oriented industrialization is hindered. Taken altogether, these findings support the central thesis of Dependency Theory, which indicate that the process of the inclusion of Pakistan into CPEC is certain to reproduce core periphery relationships more and more. This paper concludes that, unless the institutional reinforcement, diversification of investment partners, and faster industrialization is introduced to the country, long-term economic independence of Pakistan would remain diluted in the growing dependency on China.