Pakistan and China Launch CPEC Phase II, With Beijing Financing 85% of the Karakoram Highway Rebuild

Editor's note: An earlier version of this article dated the 14th JCC meeting to September 26, 2026. The meeting took place on September 26, 2025. The article has been corrected.

Pakistan and China used the 14th Joint Cooperation Committee (JCC) meeting in Beijing on September 26, 2025, to launch the second phase of the China-Pakistan Economic Corridor, according to a Planning Commission press release.

What the meeting decided

The session was co-chaired by Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal and Zhou Haibing of China's National Development and Reform Commission. According to the Planning Commission, Phase II is organised around five corridors covering industrial expansion, technology, eco-friendly growth, employment and regional links, which the ministry aligned with Pakistan's URAAN 5Es framework. Both sides agreed to publish an updated CPEC Long Term Plan within 90 days. Iqbal proposed holding JCC meetings every six months and quarterly Joint Working Group meetings during the first three years of Phase II, and proposed that the 15th JCC be held in Islamabad in May 2026, timed to mark the 75th anniversary of Pakistan-China diplomatic relations. The release listed industrial cooperation, special economic zones, agriculture modernisation, maritime development and mining among the sectors, and named ML-1, the Karakoram Highway realignment and Gwadar development as priority projects.

Two flagship projects, two different financing paths

According to Bloom Pakistan's report, China agreed to finance 85% of the Karakoram Highway realignment, needed because sections of the road were submerged by dam reservoirs. The government has approved the 241-kilometre Thakot-Raikot section at a cost of Rs576 billion, about $2 billion, and bidding will proceed in phases, starting with an 82-kilometre stretch affected by the Diamer-Basha Dam. The report said China had advised Pakistan to manage its debt rather than seek concessional loans, but made an exception for the highway to keep the road link functional in harsh weather. The ML-1 railway upgrade, at $7 billion the larger project, went the other way: China did not extend a $6 billion concessional loan, and Islamabad will seek support from multilateral lenders.

Gwadar and the wider picture

Gwadar development was among the priority projects named at the meeting. The port has since seen shippers rerouting cargo through Gwadar to avoid a disrupted Strait of Hormuz. Pakistan's external financing position is also under scrutiny in its IMF programme review.

Build Better Pakistan's Foreign Desk covers China-Pakistan relations and will follow CPEC Phase II as individual projects move toward financing agreements.