What are key challenges hindering Chinese companies' operations in Pakistan?

• CCCPK develops 'Business Climate Index of Chinese Companies'.
• Security issue identified as main obstacle to corporate growth.
• Survey reveals a resilient spirit among Chinese enterprises.

ISLAMABAD: A survey issued recently by the China Chamber of Commerce in Pakistan (CCCPK) has painted a mixed picture of the business climate for Chinese companies working in Pakistan, The News reported.

The survey report launched here on Sunday revealed a Business Climate Index score of 49.63, fractionally lower than the important 50-point threshold distinguishing optimism from pessimism.

In consultation with the Chinese Embassy in Pakistan, the CCCPK developed the 'Business Climate Index of Chinese Companies in Pakistan'. This was the first survey of the CCCPK as part of this initiative.

The study highlighted that key issues restricting the Chinese companies’ operations in Pakistan were security dilemma, troubles in remittances outflow because of foreign exchange controls, policy and currency instability.

To fully realise the potential of the China-Pakistan Economic Corridor (CPEC) and promote wider economic cooperation, both governments must continue to work toward resolving these issues and creating a more conducive business environment, highlighted the findings of first-ever Business Climate Index.

The main obstacle to corporate growth has been identified as security issues, which reflects a wider worry about the security of investments made in the area. About 30% of all Chinese businesses in Pakistan believe security situation is deteriorating in Pakistan. 83.4% of respondents to the study, which sampled 48 Chinese enterprises, believe that the security situation is getting worse and is not going to get better any time soon, it said.

“Pakistan’s current security situation is severe and complex, with a slow economic recovery,” the survey stated, stressing the external pressures that have stated to affect different operational aspects.

In addition to security issues, 60.4% of companies reported that foreign exchange controls hinder timely payments, while 58.3% cited a lack of policy continuity and poor policy implementation as significant obstacles affecting their business decisions. Moreover, 56.3% of respondents noted that the depreciation of Pakistani rupee has eroded their net assets when measured in US dollars.

“Despite these challenges, Chinese companies have actively worked to overcome difficulties and maintained overall stability in their operations, with some companies showing signs of expansion,” the report added. Around 54.2% companies noted the government’s low administrative efficiency as challenge.

Despite the hurdles, the survey revealed a resilient spirit among Chinese enterprises. Over 52.1% of firms indicated that their business volume remained stable, while 33.3% reported growth in their operations.

Looking forward, 70% of respondents expressed optimism about Pakistan’s economic development, with 47.9% expecting stability in new order volumes over the next three months.

Recent economic indicators suggest a potential turnaround for Pakistan. Inflation has decreased to 6.9%, and foreign exchange reserves have exceeded $14.7 billion, reaching a two-year high. Additionally, exports surged by 14% in the first two months of the new fiscal year, hinting at a stabilising economy.

The survey highlighted that the majority of Chinese companies plan to maintain their production scale, with 58.3% aiming to keep their workforce stable. Meanwhile, 37% of firms indicated intentions to expand their production scale, although 18.8% projected minor layoffs.

In a positive outlook, 39% of respondents believe Pakistan’s overall economic situation will improve in the next three months, while 43.8% expect it to remain stable.