The China-Pakistan Economic Corridor is a multi-billion-dollar infrastructure and development programme linking Xinjiang, a region in China, to Pakistan’s deepwater Gwadar Port. It was launched as a flagship project of China’s Belt and Road Initiative (2015), and aimed to transform Pakistan’s economy while providing China with a direct and shortened trade route to the Arabian Sea. Phase 1 (CPEC 1.0) focused on large-scale hardware installation, while Phase 2 (CPEC 2.0) centres upon a transition from government-backed construction towards business-to-business models and industrial cooperation.
Increasingly, Beijing is presenting itself as Islamabad’s pre-eminent green-energy and technological partner; this contrasts the coal-heavy energy investments associated with CPEC 1.0. BYD is a Chinese automotive company, and their planned investment in Pakistan evidences this green shift: a $150 million assembly plant based in Gharo, Sindh, is now expected to come online in late 2026 – after missing its initial production targets. The plant is under joint Chinese and local Pakistani ownership, focusing on electric vehicles and operating with a projected scalable capacity of up to 50,000 units annually.
Despite this high level of cooperation and direct investment, the initiative doesn’t necessarily work towards developing Pakistani technological autonomy – rather, dependence. The ongoing CPEC debt/IPP dispute illustrates this uneven playing field; as China has rejected Pakistan’s request to waive about PKR 170 billion in late-payment surcharges for CPEC power projects – keeping total outstanding dues at roughly PKR 423 billion. Chinese operators refused to cancel penalties arguing that these concessions would invite wider Belt and Road initiatives. Not only does this show that China isn’t giving hand-outs, but, with the dollar indexing of tariffs for payments, it also shows that China isn’t working to insulate Pakistan from currency depreciation strains. With Pakistan effectively locked into the initiative, and left at the mercy of the markets in the wider global economy, one may look back to the similar, and arguably-exploitative, investment arrangements which China has pursued in Africa.
These two developments, the commitments to green investment and the refusal to waive surcharges, may appear contradictory. In reality, however, they illustrate how economic relationships can create opportunities for development and structures of dependence at the same time. Economic liberalisation, as endless bouts of IMF restructuring programmes prove, can often foster extractive and constraining arrangements in the long-run. At the state level, Chinese capital and infrastructure can constrain Pakistan’s policy autonomy. At the household level, Chinese-produced solar technology can allow citizens to reduce their dependence on Pakistan’s centralised electricity system.
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From Petrostate to Production-State
The petrostate refers to a nation whose economy and government revenue depend heavily on extracting and exporting oil or natural gas; classic examples include Venezuela, Iran and Nigeria. The petrostate is often characterised by economic vulnerability, concentrated power, the ‘resource curse’, and a unique form of geopolitical leverage due to the price inelasticity of demand for petroleum products. The 1973 oil embargo concretely demonstrates this; the collective restriction of oil supply can generate international economic and political pressure, since states are dependent on a geographically concentrated resource. Importantly, not all petrostate power is reducible to OPEC cartelisation, since individual states still have leverage exercisable through resource ownership, fiscal dependence on hydrocarbons, and their position in global energy markets. The petrostate’s power is primarily associated with resource control, whereas China’s electrification power derives increasingly from control over the processing and manufacturing stages of the supply chain that transform resources and technologies.
Supply chains, particularly those concerned with energy, are generally divided into upstream, midstream, and downstream sectors based on the journey of a product from raw material to the final consumer. The upstream (the beginning) regards resource extraction, the midstream (the connection) refers to storage, processing and transportation, and the downstream (the end) looks at turning processed material into finished, delivered products.
China’s significance is not that it possesses a majority of the world’s critical mineral reserves, but that it has achieved extraordinary concentration in midstream processing and manufacturing. According to the IEA’s most recent figures, China accounts for more than 80% of global battery-cell production, around 85% of cathode active-material production, more than 90% of anode active-material production, almost 65% of lithium refinery, and remains overwhelmingly dominant in rare-earth processing.
The idea of the ‘electrostate’, then, is able to capture China’s supply-chain importance but still obscures where that power actually comes from. The oil producer’s leverage can be exercised through resource supply restriction, but electrified China’s leverage can be exercised because other states (even if they have the raw materials) lack sufficient alternative capacity to process, refine, and manufacture it at comparable scale and cost. The relevant distinction, beyond simply electrostate and petrostate, also includes resource scarcity versus processing and manufacturing scarcity. In terms of substitutability, China’s power is enhanced by the fact that alternative suppliers and processing pathways are expensive, technically challenging, and will find it hard to compete with well-established Chinese economies of scale, integrated supply chains, and manufacturing capacity. Structural and network power is what underlies the electro/petro categorisation.
Structural and Network Power
Susan Strange, in States and Markets (1988), distinguishes relational from structural power. Relational power refers to getting another actor to do something it wouldn’t otherwise do, structural power concerns the ability of an actor to shape the structures within which other actors make decisions. In terms of game theory, it is the difference between playing the game with other players and playing the game by editing and influencing the rule-book. Production structures are especially important here, as China’s dominance means that other states remain formally free to pursue electrification strategies but actually relatively unfree given the paucity of viable alternatives. This requires no explicit coercion, and no necessary relational power. Instead, these actors are structurally pushed into Chinese electrification dependence.
Farrell and Newman (2019) introduce the idea of weaponised interdependence: globalisation creates networks, networks are unevenly structured, some actors occupy highly central nodes, and that centrality can create political leverage. There are two mechanisms at play; the chokepoint effect wherein control over a central node allows an actor to restrict or manipulate flows, and the panopticon effect in which centrality provides information about actors using the network.
Before 2025, Chinese dominance created latent structural and network power, but that dominance alone didn’t necessarily constitute coercion. From April 2025, the introduction of licensing controls over seven rare-earth elements demonstrated the activation of China’s chokepoint position. The licensing system also created a panopticon-esque mechanism, since firms were forced to provide information concerning end-users and destinations. By October 2025, controls had expanded to additional elements, like equipment, technologies and personnel, and increased the difficulty of circumventing Chinese control. What was once passive structural dominance moved to chokepoint activation, then to more extensive and visible governance of the whole network. Market concentration alone (the passive dominance) did not create the weaponised interdependence, rather it was China’s active exercising of its leverage via export controls.
Combining the scholars, then, Strange explains the conditions of power as China occupies strategically important positions in production structures while Farrell and Newman explain the mechanism through which that condition can then become coercive – as centrality creates chokepoints and informal advantages. Cheap Chinese solar panels primarily illustrate structural dependence, while rare-earth export controls evidence active weaponisation of a chokepoint. Traditional hegemonic stability theory doesn’t cleanly apply here, since China’s leverage doesn’t depend on controlling the system as a whole; it depends upon control over particular strategic nodes within existing systems.
Applying Weiss and Wallace’s (2021) argument about China’s selective relationship with the liberal international order, China’s operating within the existing system is even more interesting. China, the authors suggest, can benefit from international markets and institutions while rejecting or selectively engaging with liberal political norms. CPEC’s political language emphasises sovereignty, territorial integrity, mutual respect, and non-interference – traditional buzzwords of Westphalianism. Yet, as the authors find, China’s actual engagement with the liberal Westphalian order depends on domestic stakeholders’ homogeneity of preferences and the closeness of particular issues to core Chinese policy concerns. In formal terms of CPEC, Pakistan and China are sovereign equals. In material reality, Pakistan can occupy a structurally dependent position within financial and production networks – a position that sits uneasily alongside those notions of shared sovereignty and respect. Perhaps sovereignty, then, should be assessed not solely through formal diplomatic language but also through the material capacity to make autonomous policy choices.
The Chokepoint
As the IEA statistics demonstrate, China has concentrated control of critical midstream nodes. However, the chokepoint is not necessarily permanent, and other states are attempting to actively restructure these networks. The United States, for example, has recently invested in Lithium Americas/Thacker Pass – an example of building domestic extraction and processing capacity. The EU has pursued similar industrial-policy efforts to reduce Chinese supply-chain dependence. While China isn’t necessarily about to lose its dominance, these efforts remind that structural power depends upon the persistence of structural concentration. At the present moment, this is a live, medium-term contest. The settled hierarchy and long-term, deterministic power arrangement is yet to be revealed. States can respond to dependence by investing in alternative nodes, subsidising domestic production, and diversifying suppliers. The concept of substitutability becomes especially important when considering this eventual hierarchy.
The Pakistan Test
CPEC’s energy programme is designed to rapidly alleviate Pakistan’s chronic power shortages. To attract foreign direct investment, the programme relied heavily on specialised financial structures consisting of Independent Power Producers (IPPs), robust sovereign guarantees, and long-term Power Purchase Agreements (PPAs). The model successfully added over 10,000MW to Pakistan’s national grid, yet created structural fiscal strains that dominate Pakistan’s economic landscape. The take-or-pay/capacity payment structures involved mean that Pakistan can remain financially obligated even when electricity demand or actual generation is lower than anticipated. The wider Pakistani capacity-payment crisis is important, here; the entire problem cannot be attributed to Chinese CPEC projects. The broader IPP system produced capacity payments of roughly Rs2.1 trillion, and the Chinese CPEC projects form one important component within this wider structure. China, while maybe not actively working to trap Pakistan, has arguably used contractual and financial commitments to constrain Islamabad’s bargaining space. Returning to Strange, formal sovereignty cannot fully eliminate the restrictions produced by states’ positions in financial and production relationships.
Walter Rodney (1972), writing many decades before the rise of the ‘electrostate’, theorised about dependency and development relationships. His key insight was that development and underdevelopment can be produced at the same time through unequal incorporation into international economic structures. Rodney’s analytical lens begs the question of whether CPEC has generated autonomous Pakistani productive capacity, or if it has primarily introduced infrastructure dependent upon external capital, technology, and contractual arrangements. His lens asks who supplies capital, who owns versus operates productive assets, who bears financial risk, where profits and technological capabilities accrue, and whether Pakistan – under these arrangements – will be empowered to develop independent and autonomous energy capacity for itself. Not every Chinese investment constitutes exploitation, dependency or imposed non-autonomy, but investment can contribute to development while simultaneously perpetuating structural dependence.
Moving from the state level to the household counterpart, the scale of Pakistan’s solar transformation has been nothing short of extraordinary. Around 16GW of solar panels were imported in 2024, while cumulative estimates exceeded 50GW by 2025-26. Chinese manufacturing (thus cheap panel prices) is what has made this rapid diffusion possible, yet imported panel capacity, importantly, does not equate to installed generating capacity.
Decentralised solar power could translate to decentralised autonomy, as rooftop solar carries particular political significance. Pakistan’s traditional electricity system is highly centralised; households depend on grid infrastructure, utilities, tariffs, and state-regulated electricity provision. Cheaper imported solar allows consumers to partially exit or reduce dependence upon the centralised system. Households have not ‘escaped’ the state, since they remain subject to regulation, taxation, grid connection and wider political-economic structures, but they have certainly enhanced their freedom within the existing energy system.
Conclusion
The second phase of CPEC contains an apparent contradiction: simultaneous Pakistani dependence and autonomy. At the state level, Chinese capital, CPEC-era contracts, capacity payments and dependence on Chinese technology constrain Pakistan’s room for manoeuvre. At the household level, however, cheap Chinese solar has enabled consumers to partially bypass the centralised electricity system. This has effects beyond individual households, such as reduced fossil fuel imports, lower exposure to international energy-price shocks and potentially improved energy security. Chinese electrification technology has the potential to both increase Pakistani dependence on China and to redistribute the limited autonomy unevenly within Pakistan. Domestic manufacturing could allow Pakistan to develop more technological knowledge, value, and productive capacity – but one has to wonder where the initial set-up investment, equipment, training, and the like may come from. The politics of electrification, therefore, depend upon a complex and changeable mix of resource control, processing and refining capacity, and which actors are able to write the rules of the game.
