Pasha Taseer Salamat
Pakistan currently maintains a position of relative neutrality between the two principal global powers, the United States and China.
However, as geopolitical tensions intensify and the international order grows more unstable, such a balancing posture is becoming increasingly difficult to sustain. This neutrality would face its sternest test if, and when, the two powers were to come into direct confrontation with one another. At the same time, Pakistan’s rising debt and economic fragility demand a decisive shift towards stability. With the United States and China engaging in economic decoupling and trade conflict, Pakistan faces mounting pressure in staying neutral.
Pakistan’s relationship with the United States dates back to the Cold War, when it served as a regional ally in exchange for military and economic support. This partnership deepened during the Afghan-Soviet conflict, where Pakistan acted as a conduit for American strategy. However, relations deteriorated following Pakistan’s nuclear ambitions, revealing a recurring pattern: American engagement tends to fluctuate based on strategic necessity.
In contrast, Pakistan’s relationship with China developed gradually, grounded in pragmatic cooperation in trade and defence. Over time, China has emerged as a critical partner, particularly through initiatives such as the China-Pakistan Economic Corridor (CPEC). At present, Pakistan maintains functional ties with both nations, making the question of alignment increasingly complex.
Alignment with China offers Pakistan significant infrastructural and industrial advantages. Through projects like CPEC, Pakistan has seen the development of ports such as Gwadar, improvements in energy supply, and modernization of transport networks. These initiatives have injected capital into the economy and created new business opportunities. Additionally, Chinese-backed projects have helped address longstanding issues such as energy shortages and infrastructure gaps, while positioning Pakistan as a potential regional trade hub.
The economic benefits are supported by tangible outcomes. Infrastructure expansion has improved connectivity, while access to Chinese technology has accelerated industrial development. Special Economic Zones along the corridor offer tax incentives and employment opportunities, particularly for Pakistan’s growing youth population.
However, these benefits come with significant costs. CPEC projects rely heavily on natural resources, contributing to environmental degradation, including deforestation. More critically, they have exacerbated regional inequality, as development is concentrated in already developed regions such as Punjab and Sindh, while areas like Balochistan remain underdeveloped and the projects like Gawadar has not been translated into economic well being of the people of Gawadar in a way as it was expected..
Another concern is employment. The influx of Chinese labour in infrastructure projects has limited opportunities for local workers, contributing to unemployment. Most significantly, Chinese-backed projects have added substantially to Pakistan’s debt burden. With national debt already exceeding $285 billion, CPEC alone has contributed approximately $25 billion through concessional, commercial, and FDI loans. While concessional loans are relatively low-interest, commercial loans impose sovereign repayment obligations regardless of project success.
Thus, while Chinese alignment offers structural development, it also risks deepening debt dependency and internal inequality.
On the other hand alignment with the United States offers a different set of economic advantages, primarily through access to global markets and financial institutions. The United States remains Pakistan’s largest export destination, with billions in bilateral trade, particularly in textiles. This relationship supports key industries and provides access to essential imports such as petroleum and industrial goods.
Additionally, alignment with the United States facilitates access to foreign direct investment and international financial institutions such as the IMF. Unlike short-term loans, FDI is tied to physical assets and is less volatile, providing a degree of economic stability during crises. It also introduces technological and managerial expertise, contributing to productivity gains.
However, American alignment also presents structural challenges. Trade relations are highly asymmetric, with Pakistan exporting low-value goods while importing higher-value products. This reinforces dependency rather than fostering economic independence.
Furthermore, FDI linked to the United States is often conditional and concentrated in already profitable sectors such as energy and pharmaceuticals, limiting its broader developmental impact. Investment flows remain limited, as global private capital tends to favour developed markets, leaving Pakistan reliant on indirect investment mechanisms.
The most significant issue is reliance on international financial institutions. While the IMF has historically provided critical support during economic crises, its loans often come with strict conditions and high interest rates. These interventions provide temporary relief but reinforce long-term dependency, trapping Pakistan in cycles of borrowing to repay existing debt.
Both alignments present trade-offs. Chinese engagement offers infrastructure development and long-term industrial potential but at the cost of increased debt and regional inequality. American alignment provides market access and financial stability mechanisms but reinforces structural dependency and limits independent growth.
The fundamental difference lies in their economic objectives. China’s model focuses on building physical infrastructure and industrial capacity, aiming to transform Pakistan into a production-based economy. In contrast, the American model prioritizes fiscal stabilization through institutions like the IMF, often addressing short-term crises rather than enabling long-term growth.
Technologically, Chinese involvement is integrated into national infrastructure projects, contributing to broad-based modernization. American investment, by comparison, remains sector-specific and driven by profitability rather than national development.
In terms of regional positioning, China offers Pakistan the opportunity to become a strategic trade hub through initiatives like Gwadar. The United States, historically, has positioned Pakistan within a framework of strategic dependency tied to geopolitical interests.
Given the current global landscape, neutrality is becoming increasingly difficult to sustain. While both alignments carry their own risks, China’s model appears to offer a clearer pathway toward structural economic transformation, notwithstanding its associated vulnerabilities. Alignment with China is no longer merely an “iron-clad” relationship; it increasingly represents a strategic opportunity to advance economic resilience, political steadiness, and regional stability in a more uncertain world.
At the same time, a balanced relationship has long been the hallmark of Pakistan’s diplomacy and should remain so for as long as circumstances permit. Any preference would arise only in the event that Pakistan were compelled to choose between competing blocs, a moment that prudence would hope never arrives.
Researcher AXIS TNS, Beaconhouse
