Why China Built Gwadar Port: Pakistan’s $60 Billion Investment and the 91% Revenue Deal
In 2015, Pakistan presented Gwadar Port as the centerpiece of an ambitious economic transformation. Backed by a promised $60 billion investment from China, the deep-sea port on Pakistan’s Arabian Sea coastline was expected to connect South Asia, Central Asia, the Middle East, and China through a vast network of roads, railways, and energy infrastructure. Pakistani officials envisioned Gwadar becoming an international trading hub comparable to Singapore.
Eleven years later, the results have fallen far short of those expectations. In 2025, Gwadar reportedly processed just 8,300 containers, while Karachi Port handled a comparable volume in a single day. The port’s navigational depth had fallen to approximately 12.5 meters, restricting access for many large container vessels. Meanwhile, its newly constructed $240 million international airport had no scheduled international flights, with domestic services operating only twice a week.
Despite its expensive infrastructure, Gwadar continues to struggle with limited shipping activity, inadequate connectivity, and security challenges. More importantly, the commercial arrangement governing its operations raises questions about who actually benefits from the project.
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Under the agreement with China Overseas Ports Holding Company (COPHC), the Chinese operator receives 91% of Gwadar Port’s revenue, while Pakistan’s Gwadar Port Authority retains just 9%.
Understanding how Gwadar reached this position requires looking beyond its commercial performance. The port was designed to serve two different ambitions: Pakistan’s desire for economic development and China’s strategic objective of securing alternative access to vital energy supplies.
Why Gwadar Port Matters to China
Gwadar’s strategic importance becomes clear when examining its location. Situated on Pakistan’s southwestern coastline, approximately 120 kilometers from the Iranian border and 400 kilometers from the Strait of Hormuz, the port occupies a position overlooking one of the world’s most important maritime trading regions.
The Arabian Sea connects the port to the Indian Ocean and the Persian Gulf, placing it close to major international shipping routes and the oil-producing countries of the Middle East.
For China, this location addresses a longstanding strategic vulnerability: its dependence on maritime energy imports.
Approximately 80% of China’s oil arrives by sea, with a substantial share passing through the Strait of Malacca. This narrow maritime passage between Malaysia and Singapore is one of the most important shipping chokepoints in global trade.
China’s dependence on the strait creates a significant security concern. In a major geopolitical conflict, the United States and its allies could potentially disrupt Chinese shipping access through the region. Such a disruption would threaten the country’s energy supplies and place enormous pressure on its economy.
Gwadar offers China a potential alternative.
A proposed overland energy corridor connecting Gwadar to China’s western province of Xinjiang could transport imported oil from the Arabian Sea into Chinese territory. The route, approximately 3,000 kilometers long, would reduce China’s dependence on maritime transportation through the Strait of Malacca.
This arrangement could also provide Beijing with greater flexibility during periods of geopolitical instability.
However, the proposed corridor faces enormous geographical, engineering, financial, and security challenges. Transporting large volumes of oil across mountainous terrain would require substantial infrastructure investment.
Nevertheless, Gwadar’s strategic value extends beyond its immediate commercial potential. Its location provides China with a presence near the Persian Gulf and the entrance to the Strait of Hormuz, while offering a possible foundation for future energy transportation networks.
For Beijing, Gwadar is therefore more than a commercial port. It represents a potential strategic alternative to vulnerable maritime supply routes.
Pakistan’s $60 Billion Economic Promise
Pakistan’s ambitions for Gwadar were considerably broader than simply establishing another shipping terminal.
The port became the centerpiece of the China-Pakistan Economic Corridor (CPEC), an ambitious infrastructure initiative involving approximately $60 billion in proposed investments.
The wider project included highways, power plants, railway infrastructure, and other developments intended to strengthen Pakistan’s transportation and energy networks.
Gwadar was expected to become the southern gateway to this economic corridor.
The development plans promised to transform the relatively isolated fishing town into a major industrial and commercial center. Proposed projects included:
– A new international airport to improve connectivity.
– A desalination plant to address water shortages.
– An expressway connecting the port with Pakistan’s national highway network.
– A dedicated free zone designed to attract international businesses.
– Supporting infrastructure intended to create hundreds of thousands of employment opportunities.
Expectations surrounding the project were so high that property prices in Gwadar reportedly increased thirtyfold as investors anticipated rapid urban and commercial expansion.
The port’s operating agreement was signed in 2013. China Overseas Ports Holding Company received a 40-year build, operate, and transfer concession.
Under this arrangement, the Chinese company would develop and operate the port for four decades before transferring it back to Pakistan.
On paper, the agreement appeared to offer Pakistan an opportunity to develop strategically important infrastructure without assuming the entire financial and operational burden itself.
However, the financial terms of the agreement eventually became one of the most controversial aspects of the project.
The 91% Revenue Agreement: Who Benefits From Gwadar?
The commercial arrangement between Pakistan and China attracted significant attention during a 2017 session of Pakistan’s Senate.
When lawmakers questioned the maritime affairs minister about the agreement, they learned that the revenue distribution heavily favored the Chinese operating company.
For every dollar generated through Gwadar Port operations, COPHC receives 91 cents. Pakistan’s Gwadar Port Authority retains the remaining nine cents.
The arrangement means that the overwhelming majority of the port’s operational revenue goes to the foreign company responsible for running it.
The situation becomes even more controversial when considering the province where the port is located.
Balochistan, Pakistan’s largest province by land area, is also among its poorest. Despite providing the coastline and hosting the infrastructure, the provincial government reportedly receives no direct share of the port’s operational revenue.
This raised concerns about the economic benefits reaching the local population.
During the Senate discussions, one senator openly criticized the agreement, describing it as heavily tilted in China’s favor.
There is an important distinction, however, between ownership and operational control. China does not automatically own Gwadar Port under the concession agreement. Instead, its operating company manages the facility for the agreed 40-year period.
Nevertheless, receiving 91% of operational revenue gives the Chinese company a substantial financial interest in the port’s performance.
The arrangement also creates an uncomfortable situation for Pakistan. Even if Gwadar eventually becomes commercially successful, the country receives only a small portion of the revenue generated by its operations.
Yet the revenue-sharing agreement is only part of the problem. For Pakistan to benefit even from its nine percent share, Gwadar must first become a functioning commercial port.
That is where another major obstacle emerges.
Why Gwadar Port Still Struggles to Attract Ships
Despite its deep-sea port designation and extensive construction work, Gwadar has struggled with a basic engineering problem: maintaining sufficient navigational depth.
The port was originally developed to a depth of approximately 18 meters, allowing it to accommodate large vessels.
However, maintaining a deep-water port requires continuous dredging. Sediment and silt gradually accumulate in navigation channels, reducing the depth available to incoming ships.
If dredging is neglected, vessels with deeper drafts may no longer be able to enter safely.
At Gwadar, years of insufficient maintenance allowed this problem to become increasingly serious.
By 2022, the port’s operational depth had reportedly fallen to approximately 11 meters. This was significantly below the roughly 14.5-meter depth cited as necessary for handling standard large container ships.
Emergency dredging subsequently improved the situation, bringing the operational depth to approximately 12.5 meters by 2025.
However, this remained insufficient for many major container services.
The problem is particularly significant because modern container shipping depends on increasingly large vessels.
Standard Neopanamax container ships, which serve major international trade routes, can carry approximately 10,000 to 14,500 containers and require drafts of up to 15.2 meters.
Gwadar’s restricted depth prevents these larger vessels from using the port.
Consequently, the facility cannot compete effectively for the ships that transport substantial volumes of international cargo.
This creates a difficult financial cycle.
Without sufficient shipping activity, Gwadar cannot generate the revenue needed to justify further investment. Without adequate maintenance and dredging, the port cannot attract larger vessels. And without commercial growth, Pakistan’s nine percent revenue share remains relatively insignificant.
The result is an expensive port with infrastructure that cannot fully support the commercial activity it was designed to attract.
Infrastructure Without Connectivity
Gwadar’s difficulties extend beyond the port itself.
A successful international shipping hub requires more than deep water, cranes, and container terminals. It also needs efficient connections to industrial centers, markets, highways, and railway networks.
Several of these supporting connections have remained incomplete.
The road infrastructure linking Gwadar with Pakistan’s national highway network has faced delays. Meanwhile, the proposed railway connection extending toward China remains a plan rather than an operational transportation route.
Security concerns have further complicated development.
Balochistan has experienced recurring security incidents, including attacks targeting Chinese nationals and infrastructure associated with development projects. These risks have forced Chinese workers to operate under extensive security arrangements, including armed convoys and fortified facilities.
Such conditions make construction, investment, and daily operations more difficult.
International shipping companies also consider security, reliability, transportation costs, and inland connectivity when selecting ports.
For shipping operators, Gwadar must compete with established regional alternatives, including Salalah in Oman, Jebel Ali in the United Arab Emirates, and Karachi in Pakistan.
These ports already possess established shipping connections and commercial relationships.
Gwadar, by comparison, has struggled to establish the same level of reliability and international shipping activity.
Its cargo figures illustrate the scale of the problem. In 2024, the port reportedly handled approximately 34,000 tons of cargo, compared with 592,000 tons in 2023.
Rather than demonstrating consistent growth, these figures reflected a substantial decline in activity.
The cranes, berths, roads, and other facilities existed, but the shipping volumes needed to make the port commercially successful remained largely absent.
Why China May Still Consider Gwadar a Strategic Success
Gwadar’s weak commercial performance raises an important question: if the port cannot attract sufficient shipping traffic, why does China continue to value it?
The answer lies in the difference between commercial profitability and strategic importance.
For Pakistan, Gwadar was primarily presented as an economic development project. Its success depended on attracting shipping companies, generating revenue, creating employment, and establishing a major trading center.
China, however, has additional strategic objectives.
Even without substantial commercial activity, Gwadar occupies a valuable position near the Persian Gulf and the Strait of Hormuz.
It also provides a potential starting point for an alternative transportation corridor into Xinjiang.
From Beijing’s perspective, the port’s geographical position may have long-term strategic value independent of its current revenue.
This does not establish that China deliberately designed the project to remain commercially unsuccessful. However, it highlights a fundamental difference between the two countries’ expectations.
Pakistan needs Gwadar to generate economic returns. China can potentially derive strategic advantages even while the port remains underutilized.
The 91% revenue arrangement further complicates the picture. If the port generates little income, China receives little direct financial return from its operating concession. Nevertheless, its strategic position and long-term infrastructure interests remain.
For Pakistan, the situation is more difficult because the expected economic transformation has not materialized.
The 2026 Strait of Hormuz Crisis Changes Everything
In early 2026, escalating conflict involving Iran, Israel, and the United States disrupted maritime traffic around the Strait of Hormuz.
The resulting uncertainty created serious problems for international shipping operators. Companies began searching for alternative routes and ports capable of handling cargo affected by the disruption.
Suddenly, Gwadar’s geographical position became particularly relevant.
Located approximately 400 kilometers from the Strait of Hormuz, the port sits close to one of the world’s most strategically important energy and shipping corridors.
For the first time in years, Gwadar experienced a significant increase in container traffic.
In April 2026 alone, the port reportedly processed approximately 11,000 containers, exceeding its entire reported container throughput for 2025.
Pakistani officials described the increase as a historic breakthrough. After years of criticism over limited activity, Gwadar was finally receiving attention as an alternative shipping location during a regional crisis.
However, the circumstances behind the increase require careful consideration.
The surge did not necessarily demonstrate that Gwadar had become commercially competitive with established regional ports. Instead, it reflected the extraordinary disruption affecting maritime transportation around Hormuz.
Shipping companies facing an emergency were forced to consider alternative facilities, even when those alternatives were less efficient.
The vessels calling at Gwadar during this period were reportedly smaller ships. Larger container vessels, which carry much of the world’s international cargo, continued to face restrictions because of the port’s limited navigational depth.
Consequently, the increase in traffic did not resolve the underlying engineering and connectivity problems.
The revenue-sharing arrangement also remained unchanged. Under the existing concession, the Chinese operator continued to receive 91% of the revenue generated by port operations.
When the ceasefire came in April 2026, emergency shipping activity began to decline.
Gwadar had experienced a temporary increase in demand, but its fundamental limitations remained.
Pakistan’s Delayed Road Links With Iran
One important development during the April 2026 crisis involved Pakistan’s land connections with Iran.
Under pressure created by regional disruption, Pakistan finally opened six road links connecting the two countries.
The project had reportedly remained stalled since 2008.
Its completion highlighted how geopolitical emergencies can accelerate infrastructure development that has struggled to advance under normal conditions.
The opening of these routes could improve cross-border transportation and provide additional connectivity between Pakistan’s southwestern region and neighboring Iran.
However, it also exposed a broader weakness in Gwadar’s development.
For years, the port had been promoted as an international trade gateway, yet essential regional connections remained incomplete or delayed.
The crisis demonstrated that geographical proximity alone cannot turn a port into a successful transportation hub. Roads, railways, logistics networks, and reliable commercial operations are equally important.
Gwadar vs. Chabahar: Two Competing Ports on the Arabian Sea
Approximately 400 kilometers across the Gulf of Oman from Gwadar lies Iran’s Chabahar Port.
The two facilities occupy strategically important positions along the same broader maritime region. Both have the potential to serve landlocked Central Asian countries and provide access to international shipping routes.
However, their development strategies differ significantly.
Chabahar has been developed as an alternative trading gateway for countries seeking access to the Indian Ocean without relying entirely on traditional regional routes.
India has been involved in operating Chabahar’s terminal, while the port’s wider transportation network includes plans and infrastructure connecting it to Central Asia.
The railway connection toward Central Asian markets is particularly important because it could strengthen the port’s role in regional trade.
Russia, China, and five landlocked Central Asian nations have also been identified as potential users of transportation routes associated with Chabahar.
Despite facing the complications of American sanctions against Iran, the port has continued to attract strategic and commercial attention.
Gwadar and Chabahar therefore represent competing approaches to regional connectivity.
Both seek to connect maritime trade with inland markets across Central and South Asia. Both benefit from their proximity to major shipping routes. And both have the potential to influence how landlocked countries access international markets.
Yet their ownership, operating arrangements, and political relationships differ.
Gwadar was developed with substantial Chinese financial involvement under a long-term operating concession that gives the Chinese company 91% of its port revenue.
Chabahar, meanwhile, has benefited from Indian participation in its terminal operations despite the challenges created by sanctions.
The competition between these ports is not simply about container volumes. It also reflects the wider geopolitical interests of China, India, Iran, Pakistan, and Central Asian countries.
For Pakistan, Chabahar represents an important regional competitor. If Iran continues improving its transportation connections while Gwadar struggles with maintenance and infrastructure delays, Pakistan risks losing opportunities to establish itself as a major regional trade gateway.
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Gwadar Port was presented as the foundation of Pakistan’s economic transformation and a strategic gateway connecting China with the Arabian Sea. Backed by billions of dollars in proposed investment, it was expected to attract international shipping, create employment, strengthen regional trade, and generate substantial economic returns.
More than a decade later, those ambitions remain largely unfulfilled.
The port faces serious engineering limitations, incomplete transportation connections, security challenges, and competition from established regional shipping hubs. Its 40-year operating concession also means that China Overseas Ports Holding Company receives 91% of its operational revenue, leaving Pakistan with just nine percent.
The 2026 Strait of Hormuz disruption temporarily demonstrated the potential value of Gwadar’s location. However, emergency shipping activity cannot replace the infrastructure, maintenance, and commercial relationships required for long-term success.
Ultimately, Gwadar represents two very different calculations. For China, it offers a strategically valuable position near the Persian Gulf and a possible alternative to vulnerable maritime energy routes. For Pakistan, it was supposed to become an engine of economic growth.
The port has not necessarily failed to serve its strategic purpose. But the economic transformation Pakistan expected has yet to arrive.
Its cranes remain in place, its berths are waiting for ships, and its future depends on whether Pakistan can turn geographical advantage into a functioning commercial network.
The central question is no longer simply why China built Gwadar. It is whether Pakistan can eventually make the port work for its own economy.
