The Pakistan Prize

This article sheds light on how Beijing is winning the battle against the US for Pakistan, South Asia’s nuclear state.

Pakistan has become the most contested strategic prize in the great power competition between the US and China. With 240 million people, nuclear weapons, and a position bridging South Asia, Central Asia, and the Middle East, Pakistan’s alignment could reshape the entire Indo-Pacific balance. However, the numbers tell a stark story: China is winning decisively.

The Great Investment Divide

The scale of Chinese engagement outweighs American efforts. Through the China-Pakistan Economic Corridor (CPEC), Beijing has committed $46 billion since 2015, the largest bilateral infrastructure program between any two countries. Meanwhile, US aid to Pakistan has collapsed by 87% since its post-9/11 peak, falling from over $2 billion annually to just $265 million per year between 2019 and 2024.

This represents a 31:1 Chinese investment advantage, a ratio that translates into tangible influence. Furthermore, China imported $226.5 million worth of sesame seeds from Pakistan in 2024, accounting for over one-fifth of Pakistan’s sesame seed exports, demonstrating deep agricultural integration beyond headline infrastructure projects. Thus, China-Pakistan bilateral trade reached $27.4 billion in 2024, compared to just $6.8 billion between the US and Pakistan.

Moreover, the infrastructure transformation is visible across Pakistan. Chinese-funded energy projects have added over 5,000 MW of generating capacity, representing a potential 20% increase in Pakistan’s total energy output. Additionally, the Gwadar port, developed with over $1 billion in Chinese investment, now boasts 12 operational berths compared to just two in 2015, with annual capacity reaching 13 million tons.

America’s Diminishing Footprint

Trump’s suspension of all aid to Pakistan until April 2025 symbolises America’s declining engagement. The executive order stopped all aid for 90 days, with continuation based on how countries’ foreign policies benefit America. Even the $397 million security aid exception granted during Trump’s first 100 days highlights the inconsistent, politically driven nature of US engagement.

This retreat comes at a critical moment. From 2002 to 2018, Pakistan received $34 billion from Washington, substantial by any measure. However, the precipitous decline reflects America’s strategic pivot toward East Asia and frustration with Pakistan’s hedging between US and Chinese interests. The result is a self-fulfilling prophecy: reduced American engagement pushes Pakistan further into China’s orbit.

The sectoral comparison reveals America’s strategic disadvantage. China dominates infrastructure (95% vs US 5%) and energy (98% vs US 2%), while America retains advantages only in security cooperation (85% vs China’s 15%) and education/health sectors (70% vs China’s 30%). Nonetheless, these remaining areas of US strength are precisely those most vulnerable to political tensions and aid suspensions.

The Debt Trap Reality

CPEC’s financial structure creates both opportunities and vulnerabilities for China. CPEC outflows would start from 2021 and spread over 20 to 25 years, with maximum outflows in 2024 and 2025. Meanwhile, Pakistan faces peak debt service payments of $3.2 billion annually through 2025, representing a significant strain on public finances.

Chinese loans now constitute 27% of Pakistan’s external debt stock, creating structural dependencies that transcend political cycles. However, implementation challenges are emerging. The Sahiwal coal-fired power plant faces overdue payments of PKR 88 billion (USD 315 million) by October 2024, indicating serious financial sustainability concerns.

The initial enthusiasm for the nearly $30 billion that China injected into Pakistan has now vanished, with CPEC becoming entangled in Pakistani domestic politics. Therefore, this growing political backlash suggests that economic dominance doesn’t automatically translate into sustainable influence.

Strategic Implications

China’s investment advantage creates geopolitical consequences extending far beyond bilateral relations. Gwadar port provides Beijing with potential naval access in the Arabian Sea, affecting sea lane security for India, Gulf states, and Western powers. The facility already hosts approximately 3,000 Chinese personnel and has created 15,000 direct jobs for Pakistanis, embedding Chinese presence in Pakistani society.

Moreover, the nuclear dimension adds urgency to this competition. China’s influence over a nuclear weapons state affects regional deterrence calculations and non-proliferation regimes. Therefore, reduced US intelligence cooperation capabilities may impact counterterrorism operations extending from Afghanistan to the broader South Asian region.

For India, Pakistan’s tilt toward China represents a nightmare scenario, encirclement by a hostile nuclear-armed neighbour increasingly integrated with India’s primary strategic rival. This dynamic could drive New Delhi toward even closer security cooperation with Washington, ironically strengthening US alliances even as America loses influence in Pakistan itself.

The Sustainability Question

Despite China’s current advantages, sustainability concerns may limit long-term influence. Pakistan’s external debt-to-GDP ratio has reached 37.8%, with debt service consuming 49% of government revenues. Thus, front-loaded CPEC repayments create fiscal pressures that could generate political instability.

Moreover, China’s model relies heavily on state-led infrastructure investment rather than private sector engagement or civil society connections. This creates dependencies without the social bonds that characterised America’s post-war alliance relationships. Furthermore, Pakistani elites increasingly recognise the risks of over-dependence on any single partner.

Policy Implications

For Washington, the Pakistan case study illustrates the limitations of aid-based influence in an era of great power competition. Alternatively, Chinese investment, while creating debt dependencies, also delivers tangible economic benefits that American assistance programs cannot match. Additionally, the suspension of aid during moments of tension, as with Trump’s recent executive order, further demonstrates the transactional nature of US engagement.

A more effective American strategy would require a sustained economic partnership focused on sectors where US advantages remain strong: technology, healthcare, and education. Furthermore, coordination with allies like Japan, South Korea, and Gulf states could provide alternative investment sources, reducing exclusive Chinese dependence without requiring massive US financial commitments.

For China, the Pakistan relationship demonstrates both the potential and limitations of economic statecraft. While CPEC has created unprecedented influence, sustainability concerns and political backlash show that economic dominance requires careful management to avoid overreach.

The Road Ahead

The quantitative evidence reveals a stark reality: China is winning the battle for Pakistani influence through the sheer scale of economic engagement. Meanwhile, America’s 87% reduction in aid reflects broader strategic priorities but leaves a critical gap in South Asian engagement.

However, the ultimate test lies not in initial investment volumes but in sustainable partnerships that create genuine prosperity while maintaining strategic autonomy. Thus, Pakistan’s growing debt burden and political concerns about Chinese dependence suggest that the current trajectory may not be sustainable.

The winner in this great power competition will be determined by who can best balance economic engagement with respect for Pakistani sovereignty, a lesson with implications extending far beyond South Asia as US-China competition intensifies globally.

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