Analysis of Pakistan and China’s Trade Development under the Conception of "China - Pakistan Economic Corridor"

Abstract

This paper conducts a comprehensive analysis of the evolving trade dynamics between Pakistan and China, focusing on the transformative impact of the "China-Pakistan Economic Corridor" (CPEC). Through empirical investigations into the complementarity and competitiveness of commodity trade, the study elucidates key patterns that shape the bilateral economic relationship. The classification of goods underscores a substantial degree of complementarity, with China emerging as a specialized exporter of transport equipment, mechanical and electrical products, wood, paper, stone pottery, optical instruments, and more to Pakistan. In return, Pakistan specializes in exporting living animals and their products to China, establishing a robust and mutually beneficial complementarity. However, a structural disparity is observed in the trade patterns, where China predominantly exports industrial manufactures to Pakistan, while Pakistan's exports to China are centered on primary products. Despite this dissimilarity, the Sino-Pakistani trade landscape remains highly complementary. The study identifies ten categories of Chinese goods, including leather products, textiles, and base metals, which exhibit significant competitiveness in the Pakistani market. Conversely, Pakistan competes strongly in China with items such as live animals, plant products, and textiles. Within these categories, the paper notes that competition in certain industries, such as leather products and textiles, is characterized by the coexistence of different products with currently moderate competitive performance. Furthermore, the relatively small contribution of specific commodities to bilateral trade results in an overall weak competitiveness between the two nations. In conclusion, this analysis sheds light on the strengths and weaknesses of Pakistan and China's bilateral trade, emphasizing the role of the China-Pakistan Economic Corridor as a transformative force. The study anticipates that ongoing investments in CPEC, particularly in China's infrastructure and energy sectors, will contribute to the expansion of domestic demand in Pakistan, fostering a conducive market environment for sustained and long-term cooperation between the two nations.