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In a significant move to boost Chinese investment, Pakistan has approved a short-term policy allowing Chinese firms operating in the Gwadar Free Zone to retain 50% of their export proceeds in special foreign currency accounts.
According to details, these funds can be freely used for international payments related to current account transactions without prior approval from the State Bank of Pakistan (SBP). The decision aims to remove a major financial barrier that has long hindered the relocation of Chinese industries to Gwadar.
This step follows extensive discussions by the Cabinet Committee on Chinese Investment in Pakistan (CCoCIP), which earlier directed relevant ministries and the SBP to launch a foreign currency facilitation pilot for Gwadar.
The reform comes ahead of Prime Minister Shehbaz Sharif’s visit to China later this August, where he will attend the Shanghai Cooperation Organisation’s Heads of State Council meeting. A ministerial committee has been formed to ensure that the visit delivers tangible results for economic cooperation, particularly in resolving long-standing issues faced by Chinese investors.
A key focus of the committee has been whether to proceed with a Business Conference in Tianjin on September 2. While Pakistan’s embassy in Beijing supports the idea, some cabinet members believe such events have produced limited investment despite numerous MoUs and B2B meetings in the past.
Debate Over Tianjin Business Conference as Investment Impact Remains Unclear
To strengthen the impact of the visit and drive actual investment, officials are now prioritizing structural reforms over symbolic agreements. The 50% export retention policy is viewed as a critical first step, though the SBP has emphasized the need for long-term legal reforms, including amendments to the Gwadar Port Authority Act. These changes would bring Gwadar’s framework in line with Export Processing Zones and facilitate broader foreign currency use.
Other persistent concerns from Chinese investors include inconsistent policies, profit repatriation issues, exchange rate risks, and inadequate infrastructure. To address these, the committee has recommended offering operational SEZs and industrial zones with long-term land leases and affordable electricity.
Power supply remains a pressing issue in Gwadar. The committee has tasked the Ministry of Energy to coordinate with the Pakistan Navy to provide interim electricity to the area’s desalination plant, while the Power Division has been instructed to expedite infrastructure upgrades in Rashakai SEZ.
The ministerial committee, led by SAPM on Industry Haroon Akhtar Khan and Commerce Minister Jam Kamal Khan, is also working with the Special Investment Facilitation Council (SIFC) to finalize a sector-specific investment pitch book. Priority sectors include chemicals, electric vehicles, solar panels, software, ICT, food processing, and petrochemicals.
By removing key regulatory and operational hurdles, Pakistan is aiming to convert China’s interest into real, project-based investment. The approval of the 50% export proceeds retention marks a decisive shift toward addressing investor concerns ahead of the high-level diplomatic visit.
