Under 'One Belt One Road' initiative, China has introduced a new model of economic development of cross-continental connectivity. With all its promising prospects, the initiative raises a question how such grand designs are going to impact the institutions of countries susceptible to potentially adverse impacts of Chinese investments. The case study of Pakistan -the closest ally of China -is a good example. China has started investing more than $50 billion in energy, industrial and communication infrastructure across the country. But the combination of too much and too quick Chinese investments -free of 'governance-related conditionalities' normally attached with Western aid -and Pakistan's domestic issues has some adverse impacts on latter's internal politics and state institutions. Lack of transparency, civil-military divide, ethnic differences, discrediting media, widening current account deficit, securitisation of trade and undoing the economic reforms (undertaken under International Monetary Fund program) are some of the unfavourable aspects of China-Pakistan Economic Corridor.

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Ever since the grey-listing of Pakistan by the Financial Action Task Force (FATF) in early 2018, India and Pakistan have been vying for competing goals. According to Indian perspective, Pakistan is still engaged in cross-border terrorist activities in Indian territories. Therefore, Pakistan must be downgraded to blacklist. On the other hand, Pakistan insists it has taken ample measures to comply with FATF demands. According to Islamabad, not only has Pakistan started taking actions against domestic militant units, it has been playing vital role in facilitating 'peace talks' to end the Afghan war. In contrast, this article argues both of these narratives verge on extremes in their own respects. India's recent claims about cross-border terrorism are profoundly diluted by domestic resistance it has been facing in Indian-administered Kashmir of late. Moreover, a black-listed Pakistan could pose an even bigger challenge. Similarly, this article argues that getting Pakistan off the grey list would be too early at the present time. The country still needs to implement half of its 'action plan' as identified by the FATF. A more realistic option, therefore, would be to take the middle ground and proceed with current FATF supervision of Pakistan's performance for a further period.

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