Published: 05:00 PM, 01 October 2026 Last Update: 05:21 PM, 01 October 2026
China’s biggest port project in Pakistan faces a reckoning: Why Gwadar has failed to become the trade hub it promised
A general view of Gwadar port in Gwadar, Pakistan October 4, 2017. (REUTERS)
”Gwadar was sold as a potential Dubai or Singapore of South Asia, backed by billions in Chinese investment under CPEC. Its weak cargo volumes, difficult connectivity and recurring security threats have left that vision far from reality. ”
For more than a decade, Gwadar Port has been presented as the crown jewel of the China-Pakistan Economic Corridor and one of the most strategically important projects under Beijing’s Belt and Road Initiative. But the port’s promised transformation into a major regional commercial hub has yet to materialise.
A recent analysis by Australia’s Lowy Institute has raised fresh questions over the future of the project, arguing that China’s Gwadar gamble is no longer delivering the commercial or strategic returns originally envisaged. The analysis says Beijing’s risk appetite is diminishing as security problems mount and China faces its own economic pressures.
This does not mean China is preparing for an immediate withdrawal from Gwadar. Rather, the emerging picture points towards a more cautious approach, with the port’s commercial ambitions increasingly constrained by security, geography, weak local infrastructure and Pakistan’s economic difficulties.
From CPEC showcase to strategic liability?
When CPEC was unveiled in 2013 and significantly expanded during Chinese President Xi Jinping’s 2015 visit to Pakistan, Gwadar was supposed to become a key link between western China and the Arabian Sea.
Its location on Pakistan’s Balochistan coast, close to the Persian Gulf and the Strait of Hormuz, gave the port considerable strategic significance. The underlying logic was straightforward: Chinese goods and energy supplies arriving through the Arabian Sea could potentially avoid part of the vulnerable maritime route through the Malacca Strait by travelling overland towards Xinjiang.
The plan involved connecting Gwadar with Kashgar through a network of roads, railways and energy infrastructure. China’s state-owned China Overseas Port Holding Company was given a long-term operating lease for the port. The wider CPEC programme subsequently envisaged billions of dollars in investment in roads, power projects, an airport, industrial zones and other infrastructure.
Yet the commercial transformation promised by Islamabad and Beijing has remained elusive. The Lowy Institute analysis argues that Gwadar has increasingly become a financial and security liability rather than the commercial success originally envisioned.
The security problem is getting harder to contain
The biggest challenge for the project is the security environment in Balochistan. Baloch separatist groups have repeatedly targeted Chinese citizens and CPEC-linked infrastructure. The Baloch Liberation Army and its Majeed Brigade have specifically identified Chinese interests as targets.
The March 2024 attack on the Gwadar Port Authority complex was one of the most serious assaults on infrastructure associated with the project. Chinese nationals have also been targeted elsewhere in Pakistan, including in a suicide bombing near Karachi airport in October 2024.
The attacks have placed growing pressure on Pakistan to provide stronger protection for Chinese citizens and projects.
Islamabad has established dedicated security formations, including the Special Security Division, to protect CPEC projects. But the continued attacks have demonstrated the difficulty of securing infrastructure spread across a volatile province.
The Lowy Institute argues that Chinese engineering teams, convoys and infrastructure have become primary targets for insurgent groups and that the security burden has strained the relationship between Beijing and Islamabad.
This is particularly significant because Gwadar was supposed to demonstrate how Chinese infrastructure investment could transform a remote region. Instead, the project remains heavily dependent on security arrangements and military protection.
Geography is another major problem
Gwadar's biggest strategic selling point was also its biggest logistical challenge. The original CPEC vision assumed that goods moving between China and the Arabian Sea could travel overland through Pakistan. But the route between Gwadar and Xinjiang passes through some of the world's most difficult terrain.
The Karakoram Highway reaches altitudes of more than 4,600 metres and passes through areas vulnerable to landslides, avalanches and extreme weather, according to the Lowy Institute. (The Lowy Institute)
The proposed corridor also crosses Gilgit-Baltistan, Khyber Pakhtunkhwa and Balochistan before reaching Gwadar. These areas present their own security and infrastructure challenges.
For energy shipments, the economics are even more complicated. Moving oil from an Arabian Sea port across thousands of kilometres of mountainous terrain requires expensive pipelines, railways or road transport.
That raises a fundamental question about the original CPEC proposition: whether moving energy overland through Pakistan can compete economically with conventional maritime shipments directly to China's eastern ports.
The Lowy Institute analysis argues that pipelines and overland trucking are substantially more expensive than ocean freight and that a long energy corridor through difficult and politically unstable terrain would also be difficult to secure.
Gwadar still lacks the commercial ecosystem
A successful port needs more than berths and cranes. It needs cargo, shipping connections, industries, warehouses, road and rail networks and a functioning economic hinterland.
Gwadar has struggled to develop that ecosystem.
The Lowy Institute says major international shipping lines continue to bypass Gwadar in favour of established regional hubs such as Dubai, Salalah and Karachi because the port lacks sufficient cargo volumes to justify regular calls.
That leaves Gwadar heavily dependent on state-directed or specialised cargo rather than the broad commercial activity originally envisaged.
The problem extends beyond the port itself. Gwadar has faced persistent shortages of drinking water and electricity, while connectivity and local infrastructure remain inadequate.
This creates a striking contradiction at the heart of CPEC. Billions of dollars have been committed to strategic infrastructure, yet the city surrounding the flagship port continues to face basic infrastructure shortages.
Local opposition has complicated the project
The port has also faced sustained opposition from sections of the local population. The Haq Do Tehreek movement has repeatedly organised protests over water shortages, electricity, fishing rights and restrictions imposed around the port.
Fishing is particularly important to Gwadar's local economy. The expansion of port infrastructure, security exclusion zones and industrial fishing activity has created tensions with local fishermen.
The Lowy Institute has argued that the Chinese and Pakistani authorities have struggled to build local support for the project because sections of the Baloch population believe they have not received adequate economic benefits from the investment.
That creates another challenge for Beijing. Infrastructure can be built relatively quickly, but sustained commercial activity requires a stable political and social environment around it.
China is becoming more selective with overseas projects
Gwadar's problems are also emerging at a time when China's overseas investment strategy has become more cautious. The era of very large Belt and Road infrastructure projects has increasingly given way to what Beijing describes as a more selective approach, often associated with the "Small is Beautiful" framework.
The shift places greater emphasis on projects that are financially sustainable, technologically advanced and capable of generating clearer returns. That makes Gwadar particularly difficult to justify as a conventional commercial investment.
The Lowy Institute notes that China has already invested heavily in the port, while the project continues to face security costs and weak commercial returns. Under the current lease arrangement, 91% of port revenues are supposed to go to Beijing, according to the analysis.
The problem is that a large share of revenue from a port has little value if the port itself is not generating substantial commercial activity.
Pakistan's economic burden adds another layer
For Pakistan, the stakes are considerably higher. CPEC brought significant Chinese financing into roads, energy and infrastructure projects, but Islamabad continues to face severe balance-of-payments pressures and dependence on external financing.
A commercially weak Gwadar therefore presents Pakistan with a difficult equation. Infrastructure and associated debt obligations remain, while the port has yet to generate the level of economic activity originally promised.
The Lowy Institute describes Pakistan as being caught in a structural balance-of-payments crisis and reliant on IMF support and Chinese debt arrangements.
This means Islamabad has limited room to absorb additional costs associated with securing, maintaining and expanding an underperforming strategic project.
What does this mean for China's military ambitions?
Gwadar's strategic value has never been limited to trade.
Its location near the Strait of Hormuz gives it potential importance for Chinese naval logistics and access to the western Indian Ocean. Earlier Lowy Institute analysis has noted longstanding speculation about whether Gwadar could eventually support Chinese naval vessels through functions such as fuelling, provisioning and maintenance.
That does not establish that Gwadar is being converted into a Chinese naval base.
However, if commercial activity remains limited, the strategic value of the facility could increasingly lie in functions other than conventional container shipping.
The latest Lowy Institute assessment argues that Beijing could downscale the port's commercial ambitions and move towards a smaller, heavily protected facility with potential naval refuelling functions. It also raises the possibility of restructuring the lease in the longer term.
What happens to the CPEC dream?
The central problem for Gwadar is that its original promise depended on several assumptions working simultaneously: Pakistan needed political and security stability, the port needed a viable commercial hinterland, overland connectivity to China needed to be economically competitive, and Chinese investment needed to continue at a large scale.
Those conditions have proved difficult to sustain.
For Pakistan, Gwadar remains an important symbol of its relationship with Beijing and a major component of the CPEC narrative. Officially, Islamabad continues to promote CPEC's second phase and the port's potential as a regional trade hub.
But the gap between diplomatic announcements and activity on the ground remains significant.
For China, the question is increasingly about how much additional capital and security expenditure can be justified for a project whose original commercial objectives have not been achieved.
Gwadar is therefore unlikely to disappear from China's strategic calculations. But its future may look very different from the original vision of a bustling Pakistani Dubai or Singapore.
The Lowy Institute's assessment puts the emerging choice starkly: China may retain Gwadar, but with a significantly reduced commercial ambition and a greater focus on strategic and logistical utility. (By, Vishal Malkan)
>> Source: Money Control
