Walking a tightrope between China and US

Pakistan is walking a tightrope between two global powers — the United States (US) and China. Both rivals are now vying for influence in Pakistan, each with its own strategy and set of interests. For Islamabad, the challenge is how to balance these competing relationships without losing credibility or leverage.

China has long been an investment partner for Pakistan. It also acted as a strategic ally in Pakistan's recent war with India, where Beijing provided technical support. The US, by contrast, has historically been more of a strategic partner in war than an investor in development. Washington poured billions into military campaigns but has no history in terms of economic investments.

After its withdrawal from Afghanistan, the US has continually shifted its policy towards Pakistan. Now, Washington appears to be showing renewed interest in Pakistan not just for security purposes but for investment as well. To some extent, it seems to be following in China's footsteps, using economic engagement to re-establish its presence in the country.

A recent US delegation visit reflected this new approach, with officials seemingly keen to know more about Gwadar Port and even expressing interest in setting up an LNG terminal there. That is significant because Gwadar has been central to China's ambitions under the China-Pakistan Economic Corridor (CPEC). The US, in effect, is now considering a direct presence in areas where Beijing has already built influence.

The key question is: can Pakistan maintain a balance between the two arch-rivals? So far, Islamabad has managed to court both Washington and Beijing. But the durability of this balancing act will only become clear with time.

The US has long used Pakistan as a partner in its wars. During the Cold War, Washington poured money into General Zia's regime to support the Afghan jihad against the Soviet Union. After 9/11, it again used Pakistan as a frontline ally in its war on terror.

During General Pervez Musharraf's era, Pakistan received about $15.3 billion in US aid between 2002 and 2009. But almost three-fourths of that, around $8.1 billion, was tied to security, covering Coalition Support Funds for counterterrorism, Foreign Military Financing, and other defence assistance. Only 28% of this went toward economic support.

Foreign direct investment (FDI) did rise during this period, peaking at $5.4 billion in FY2008, reflecting strong investor interest. Still, the pattern remained clear: US funding was driven more by military priorities than by long-term economic development.

Pakistan exports around $6 billion worth of goods annually to the US, while imports from the US stand at just $2 billion.

And despite US military 'investment' being stronger than Chinese trade, China's investment in Pakistan has always remained in favour of Islamabad – irrespective of the geopolitical environment across the globe.

Unlike in the past, however, the US now appears serious about investment. Washington is exploring opportunities in Pakistan's mining, oil, and gas sectors, with a particular focus on Balochistan.

As the US shifts its investment focus from India to Pakistan, Islamabad is expected to attract investments from Washington and its allies.

Currently, Pakistan has received $6 billion in financing pledges for the Reko Diq gold and copper project from Europe and the US. China, notably, has not made any commitment yet. The US Exim Bank has now committed to financing the project, and a US firm has signed an MoU with Pakistan's Frontier Works Organisation to invest in mining.

Balochistan, once considered a no-go area for foreigners, is now central to this strategy. In the past, US companies like ExxonMobil sought opportunities in LNG terminals and onshore drilling but were denied access. Today, however, Islamabad seems more willing to allow US firms into Balochistan, even though Chinese firms remain deeply embedded in Gwadar.

This raises an obvious question: is Washington entering Balochistan primarily to counter China's footprint there?

China's role in Pakistan is far more entrenched. CPEC was launched with promises of $62 billion in investment. But progress has been hampered by political instability, economic pressures, and security risks. Projects stalled during the Pakistan Tehreek-e-Insaf (PTI) government, though Beijing welcomed the return of Prime Minister Shehbaz Sharif, hoping for a revival.

Yet hurdles remain. Special economic zones (SEZs) under CPEC have seen little progress due to bureaucratic hurdles and changing government policies. Gwadar Port, the flagship project, still lacks the infrastructure to function as intended. According to government officials who visited recently said many Chinese workers have even left the port.

Beyond CPEC, China has made notable investments in telecoms through Huawei and ZTE, in the mineral sector through the Saindak copper-gold project and are also engaged in the auto sector with investments in electric vehicles and assembly plants. Chinese auto giant, BYD, has also come to Pakistan to invest in electric vehicles.

Most critically, China has kept Pakistan's economy afloat through repeated loan rollovers and deposits, enabling Islamabad to secure International Monetary Fund (IMF) bailouts. However, Chinese loans now account for nearly one-third of Pakistan's $130 billion in total liabilities. Debt servicing pressures have only worsened, while Chinese power plants in Pakistan face mounting circular debt.

Security is another sticking point. Attacks on Chinese workers have strained relations, prompting Beijing to demand greater control over its assets and personnel. At one point, Chinese officials even asked to deploy their intelligence services in Pakistan, a request that was denied. Hotline contacts between Pakistani and Chinese agencies were later established, but Beijing remains concerned.

While China struggles with stalled projects and debt concerns, the US is showing ambition.

This is a rare moment in history for Pakistan. Two global rivals seem simultaneously eager to invest into its economy. Beijing brings scale, loans, and existing infrastructure, while Washington promises capital inflows, mining expertise, and access to Western markets.

Pakistan stands at a crossroads. It can welcome both US and Chinese investment, using competition between them to its advantage. But doing so requires careful diplomacy, consistent policies, and above all, security guarantees for foreign investors.

If Islamabad mishandles this moment, it risks alienating one power while failing to attract meaningful commitments from the other. If it succeeds, however, Pakistan could turn great power rivalry into an economic lifeline.

For now, both Washington and Beijing are watching. The future of Pakistan's economy, and its geopolitical leverage, may depend on how skilfully it walks this tightrope.

THE WRITER IS A STAFF CORRESPONDENT