Role of China-Pakistan Economic Corridor in Pakistan’s Trade, Investment, Energy, Infrastructure, and Stock Market

Abstract

The beginning of 21st century is considered as atmosphere of economic globalization and geo-strategic partnership among countries. The China-Pakistan Economic Corridor (CPEC) is one of such partnership that will connect these two countries with Asia, Africa and Middle East. The CPEC agreement includes projects of energy, Gwadar port, highways, railways and others having total investment of 46 billion U.S $. In this study, we have examined business articles, news articles, facts and figures under content analysis to test the potential impact of CPEC on Pakistan’s trade, investment, energy, and infrastructure. We may conclude that at present CPEC has limited impact, but it will increase on completion of CPEC. We have also analyzed impact of CPEC on Pakistan Stock Market (PSX) by using idea of event study and have identified four events from start of CPEC (April 2015) to purchase of 40% share of Pakistan Stock Exchange (PSX) by China (December 2016). We established theoretically and practically that CPEC has positive impact on stock market. This finding is supported by practical occurrences that Morgan Stanley Capital International (MSCI) announced to include Pakistan index in Emerging Market Index and Bloomberg ranked Pakistan index as 5th best performing stock around the world in 2016.Overall the CPEC is game changer for the Pakistan economy and will support to China as well as to achieve its targets.