China Delays Funding, Pakistan Rail Project Gets A New Backer – Big Test For 'Ironclad Friendship'?

Introduction

The China-Pakistan Economic Corridor (CPEC), a flagship of China's Belt and Road Initiative (BRI), has long been hailed as a symbol of the "ironclad friendship" between China and Pakistan. However, recent developments surrounding a critical railway project have raised questions about the strength of this partnership. With China delaying funding for the Karachi–Rohri rail upgrade, the Asian Development Bank (ADB) has stepped in as the new backer, marking a significant shift in the dynamics of CPEC and testing the resilience of Sino-Pakistani ties. This blog explores the implications of this development and what it means for the future of their strategic relationship.

The Karachi–Rohri Rail Project: A Cornerstone of CPEC

The Karachi–Rohri railway line, a 500-km stretch in southern Pakistan, is a vital component of the broader Mainline-1 (ML-1) project, which aims to modernize Pakistan’s aging railway network. Initially valued at $6.8 billion, the ML-1 project was designed to upgrade 1,800 km of tracks, doubling train speeds and increasing capacity from 34 to over 150 trains per day. As a centerpiece of CPEC, the project was expected to enhance connectivity, boost trade, and support strategic initiatives like the Reko Diq copper and gold mine, set to begin production in 2028.

However, after a decade of negotiations, China has yet to deliver the promised financing for the Karachi–Rohri segment, valued at $2 billion. Pakistan’s mounting debt, including challenges in repaying loans for Chinese-built power plants, has complicated the funding process. This delay has prompted Pakistan to turn to the ADB, which is now in advanced talks to lead a consortium of financiers for the rail upgrade.

Why the Delay?

China’s hesitation to fund the Karachi–Rohri project stems from several factors. First, the high cost of the ML-1 project—initially pegged at $8.2 billion before being reduced to $6.7 billion—has raised concerns in Beijing, especially given Pakistan’s economic struggles. Second, China has shown reluctance to adopt alternative financing models like build-operate-transfer (BOT), which would shift some financial risk away from Pakistan. Experts suggest that China views such projects as unprofitable, preferring to offer loans rather than direct investments.

Additionally, Pakistan’s request to reschedule debt repayments for CPEC power projects has strained negotiations. The stalling of CPEC momentum, with the last major project (the Gwadar East Bay Expressway) inaugurated in 2022, has further highlighted challenges in sustaining the initiative’s early promise. These delays have forced Pakistan to seek alternative partners to keep critical infrastructure projects on track.

ADB Steps In: A Diplomatic Balancing Act

The ADB’s entry as the lead financier for the Karachi–Rohri rail upgrade is a pragmatic move for Pakistan, which urgently needs modernized infrastructure to support projects like Reko Diq. The ADB’s involvement, which includes plans for competitive bidding and an international engineering contractor, signals a shift away from the exclusive reliance on Chinese funding. Pakistani officials have emphasized that this arrangement has been discussed with Beijing to avoid straining bilateral ties, with one official stating, “We would never do anything to jeopardize that relationship.”

The ADB’s role also reflects Pakistan’s broader strategy to diversify funding sources. In 2018, under Prime Minister Imran Khan, Pakistan explored alternatives to the traditional BRI lending model, inviting countries like Saudi Arabia to invest in CPEC projects. The ADB’s $410 million financing for the Reko Diq mine itself further underscores its growing role in Pakistan’s development landscape.

Testing the 'Ironclad Friendship'

The phrase “ironclad friendship” has been a cornerstone of China-Pakistan relations, with leaders like President Xi Jinping describing the bond as “higher than mountains, deeper than oceans, and sweeter than honey.” Yet, the shift to ADB funding raises questions about the durability of this partnership. While China’s foreign ministry reiterated its commitment to Pakistan ahead of Foreign Minister Wang Yi’s visit to Islamabad on August 19, 2025, the lack of progress on the rail project suggests underlying tensions.

Historically, CPEC has delivered significant infrastructure, including power plants and the Gwadar Port, creating over 70,000 jobs and addressing Pakistan’s chronic energy shortages. However, the slowdown in new projects and Pakistan’s struggle to service Chinese debt—estimated at $23 billion—have exposed vulnerabilities in the partnership. Some analysts argue that China’s cautious approach reflects a broader reassessment of BRI commitments, particularly in countries facing economic challenges.

Implications for Pakistan and CPEC

For Pakistan, the ADB’s involvement is a lifeline to modernize its creaking railway system, which is critical for transporting goods from Reko Diq and supporting economic growth. A senior Pakistani official warned that without upgrades, the railway could face a “crisis” in handling the mine’s output. The project also aligns with Pakistan’s goal of transitioning from an agriculture-based to an industrial economy, a key objective of CPEC.

However, the shift to ADB funding could signal a dilution of China’s influence over CPEC’s strategic projects. The ML-1 project was once deemed “too strategic” by China, leading to the ADB’s exclusion in 2017. The current arrangement suggests a pragmatic compromise, but it may also highlight the limits of China’s willingness to bear the financial risks of large-scale BRI projects in Pakistan.

Looking Ahead

As Pakistan navigates its economic challenges, the Karachi–Rohri rail project will serve as a litmus test for the future of CPEC and the Sino-Pakistani relationship. Both nations have reaffirmed their commitment to deepening ties, with plans to upgrade CPEC and explore new areas like water resource management and climate change. Yet, the reliance on external financiers like the ADB underscores the need for a more sustainable funding model.

For now, the “ironclad friendship” remains intact, but its resilience will depend on how both countries address these financial and strategic challenges. As Pakistan moves forward with the ADB-backed rail upgrade, the world will be watching to see if this marks a new chapter in CPEC or a subtle shift in the dynamics of one of Asia’s most celebrated partnerships.

Conclusion

The delay in Chinese funding for the Karachi–Rohri rail project and the ADB’s emergence as a new backer highlight the complexities of the China-Pakistan relationship. While the “ironclad friendship” has weathered many storms, this development tests its ability to adapt to economic realities and evolving priorities. As Pakistan pushes forward with critical infrastructure projects, the outcome of this rail upgrade will shape not only its economic future but also the trajectory of its strategic alliance with China.