Chinese investors see opportunity but local businesses struggle

Chinese companies are planning new investments in Pakistan, especially in Punjab's electric vehicle, information technology and tourism sectors, at a time when many Pakistani businesses report weak sales, high costs and an uncertain outlook. The contrast raises a question for the local industry; what do foreign investors, especially Chinese, see that domestic firms either cannot see or cannot act on?

On October 16, a 20-member delegation of the Pakistan-China Business Forum met Punjab's Minister for Industries and Commerce Chaudhry Shafay Hussain. The delegation included officials of Chinese companies working in EVs, IT, tourism and agriculture.

Wei Linzhui, Director of the Forum's Beijing Office, said the group wanted to showcase Chinese products in Punjab. "We want to build a China pavilion on 100 kanals of land," he said, adding that investors would set up assembly and manufacturing plants for electric buses and trucks, and companies were ready to invest in the IT sector. The forum is also studying the possibility of setting up an IT university in Gujrat.

This is not the first delegation that has met the provincial minister. Many such groups have already announced new investments in different sectors, most of which have already materialised. Provincial Minister Hussain said the government would provide the land for the pavilion. He said chip frame manufacturing was about to begin in Punjab for the first time in the country and the Faisalabad plant of Chinese phone maker was in final stages of completion.

Many electric bike plants have been opened in the province over the past year and plot prices in industrial hubs have been reduced. A community centre for foreign investors is being built in the Faisalabad Special Economic Zone (SEZ) and a 50-acre Expo Centre is planned there, with construction due to begin later this year. The minister described China's progress as a "role model" for Pakistan, adding that Chinese investment was promoting technology transfer.

He said Chinese companies had made new investments worth hundreds of thousands of dollars in Punjab over the past two and a half years. The figure is modest compared with earlier Chinese commitments, which suggests the current interest is still at an early stage.

Chinese involvement in Pakistan's economy is not new. The China-Pakistan Economic Corridor (CPEC), launched in 2015, was initially valued at about $46 billion and headline figures later rose to $62 billion. Most completed projects are related to power generation, roads and Gwadar Port. China is one of Pakistan's largest bilateral creditors.

Such investments from China arrive despite security risks. Analysts point to several reasons for continuous capital inflows. Many Chinese manufacturers face crowded home markets and are expanding into Africa, Southeast Asia, the Middle East and Latin America, not only in South Asia. Pakistan offers a population of about 240 million and demand for affordable vehicles, phones and electronics. EVs also align with Pakistan's efforts to reduce its oil import bill.

Chinese firms often have access to state-linked financing and established supply chains. Pakistani businesses operate under different conditions. Borrowing costs stayed high for much of the past three years, energy tariffs rose sharply, and taxes and import restrictions have squeezed margins. Pakistani entrepreneurs must also compete with multinationals and Chinese giants that have deeper capital and can absorb losses while building market share. Some foreign firms also benefit from tax and tariff incentives in SEZs.

A Lahore-based businessman, who asked not to be named, said local firms should not be dismissed as risk-averse; the field was actually uneven. "Chinese companies are not investing in Pakistan out of special affection. They invest everywhere, in Africa, Central Asia and Latin America, because their home market is saturated and their government backs expansion abroad," he said. "They arrive with cheap finance, long-term plans and facilities we never get. With the same tax breaks and access to credit, many local firms will invest too and may give a tough time to our neighbouring competitors."

Provincial governments are competing for this capital. Punjab is offering land, lower plot prices and SEZ facilities, while Sindh has also sought Chinese participation, particularly in energy and industries around Karachi.