China exits its biggest Pakistan project: What’s happening?

In a move that signals a quiet but significant realignment in Pakistan’s infrastructure financing landscape, the country is reportedly turning to the Asian Development Bank (ADB) to fund a critical segment of its aging railway network, a project that was originally meant to be the centerpiece of the China-Pakistan Economic Corridor (CPEC). With Beijing stepping back from financing the Main Line-1 (ML-1) project after years of stalled negotiations, Pakistan is now seeking a $2 billion loan from the ADB to upgrade the Karachi–Rohri section of the line.

This development marks a major deviation from the original vision of CPEC, under which China had pledged around $60 billion in investments for energy and transport infrastructure across Pakistan. The ML-1 railway upgrade, spanning roughly 1,800 kilometers from Karachi to Peshawar, was touted as the largest and most transformative of these projects. But after nearly a decade of diplomatic back-and-forth, the financing could not take off. Now, with the ADB stepping in, Pakistan is for the first time allowing a multilateral lender to take the lead on a project once considered a flagship of China’s Belt and Road Initiative (BRI) in the region.

Why China withdrew and what it means
According to reports, China’s decision to disengage from the ML-1 project wasn’t sudden. Concerns had been mounting in Beijing about the financial viability of the project, particularly in light of Pakistan’s worsening fiscal position and its difficulties in keeping up with debt repayments, especially in the power sector where Chinese firms have already invested billions.
A broader recalibration of China’s foreign investments may also be at play. With its own economy facing headwinds and its appetite for high-risk overseas projects diminishing, China appears to be pulling back from large-scale financing in countries with high repayment risk. Pakistan, with its ballooning debt obligations and repeated IMF bailouts, fits that profile.

The implications are both financial and geopolitical. China stepping away from its largest CPEC commitment suggests that even the “iron-clad friendship” touted by both countries has its limits when money is on the line. It also underscores how fragile Pakistan’s reliance on a single strategic partner can be, especially in high-stakes infrastructure ventures.

The exit of China from the ML-1 project may not be the death knell of CPEC, but it does reflect a loss of momentum. After a flurry of activity between 2015 and 2019 — with highways, power plants, and ports being built — the last major CPEC project, the Gwadar East Bay Expressway, was completed in 2022. Since then, progress has slowed, and Pakistan’s unpaid dues to Chinese power producers have become a growing sore point. The choice to work with the ADB on ML-1 might set a precedent for future projects.

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The Reko Diq factor
The urgency to upgrade ML-1 has been compounded by the development of the Reko Diq copper and gold mine in Balochistan. The mine, being developed by Canadian mining giant Barrick Gold, is one of the largest untapped mineral resources in the world and is expected to become a significant contributor to Pakistan’s export revenues in the years to come.
However, the logistical infrastructure needed to evacuate ore from the mine to ports is severely lacking. The existing railway line is outdated and under stress, unable to support the volume and weight of heavy cargo expected from Reko Diq operations. Without a modernised ML-1, the full economic potential of the mine cannot be realised.

This explains why ADB has not only agreed to finance a portion of the railway but has already pledged $410 million toward the Reko Diq project. For Pakistan, this is more than a transport upgrade. It’s about enabling long-term mineral exports and avoiding another missed opportunity.

A diplomatic tightrope
Pakistan’s decision to court the ADB, and, by extension, Western-aligned financial institutions, for a core CPEC project was not taken lightly. Sources told Reuters that the plan was “squared with China” in advance, reflecting Islamabad’s need to maintain cordial ties with China while still keeping its economic options open. “We would never do anything to jeopardise that relationship,” a senior Pakistani official told Reuters.

Pakistan’s army chief Asim Munir recently encapsulated this balancing act by stating, “We will not sacrifice one friend for the other.” This carefully worded remark reflects Pakistan’s attempt to avoid the perception of pivoting away from China, even as it increasingly looks to diversify its partnerships, especially with Western institutions and investors. Recent developments in US-Pakistan ties add further complexity. US President Donald Trump has shown interest in Pakistan’s mineral wealth, including assets like Reko Diq. That’s a signal that the US may also be re-engaging with Pakistan not just politically but economically.

Pakistan’s pivot to multilateral financing for a once exclusively China-backed project is not just a financial decision but also a strategic move. While Pakistan continues to affirm its commitment to the China-Pakistan friendship, actions speak louder than words. The ADB’s growing role in Pakistan’s infrastructure future could mark the beginning of a more diversified, balanced foreign policy and investment strategy.

In the long run, this could serve Pakistan well, helping the country reduce its dependency on any single partner and giving it greater leverage in its dealings with both China and the US. But the tightrope walk may not be easy for Pakistan with worsening US-China relations and a thaw in India-China ties.