A Study on Factors Influencing Pakistan's Agricultural Exports to China

Abstract

This study examines the key factors influencing Pakistan's agricultural exports to China and assesses the untapped trade potential between the two nations. Against the backdrop of the China-Pakistan Economic Corridor (CPEC), which has enhanced bilateral agricultural cooperation, Pakistan's exports to China have grown significantly, reaching approximately USD 950 million in 2024, with an 11.8% annual growth. Major export items include rice and sesame seeds, which collectively account for over 67% of the total. Analysis using the Revealed Comparative Advantage (RCA) index indicates Pakistan holds a strong competitive edge in sectors like rice, while the Trade Complementarity Index (TCI) of 0.45 reflects a moderate alignment with Chinese import demand, though lower for vegetables and processed goods.

An extended gravity model, applied to panel data from 2000-2024, identifies significant positive influences from the GDP of both countries (coefficients of 0.65 for Pakistan, 0.72 for China), the presence of the Free Trade Agreement (coefficient 0.55), and Logistics Performance Index (coefficient 0.62). Geographical distance shows a negative impact (coefficient -0.48). The model demonstrates strong explanatory power with an R-squared value of 0.72. The study estimates an unrealized export potential of USD 550 million, primarily in fruits and vegetables, projecting total potential to reach USD 1.8 billion by 2025. Conclusions emphasize the substantial trade potential but highlight the need to overcome structural barriers like non-tariff measures and climate vulnerabilities. Policy recommendations focus on enhancing logistics infrastructure, improving trade facilitation, deepening the FTA, and diversifying the export structure towards higher-value products