China-Pakistan Economic Corridor is a massive investment initiative by China with a whopping amount of $62 billion. The project includes various short term and long term plans for energy, infrastructure, IT and R&D projects. The completion of short term plans by the end of 2018 and initiation of long term projects demand a comprehensive analysis as the project of CPEC presents both threat and opportunities for local producers. The threats include competition for local producers from innovative products of China and technological and managerial superiority of Chinese companies over Pakistani industry. However, the domestic producers feel more optimist as energy and infrastructure projects, and induction of new technology would benefit the business sector in Pakistan. The purpose of this study is to explore and identify the possible threats and opportunities considering “Infant Industry Theory” as an analytical framework. A qualitative and quantitative research methodology is employed and the data is gathered from 20 divergent and potential sector of SMEs through a close ended survey questionnaire. The likert scale is used to evaluate the opinions of respondents for awareness, challenges; and threats and opportunities of CPEC. The results revealed that SMEs owners are now more aware about the CPEC and its related details while the major challenges for producers were to cope with the low access to finance, unavailability of business and legal advisory services and difficulties in market access. Moreover, the majority of selected respondents consider the project of CPE as an opportunity for their businesses, industry and economy of Pakistan. It is thus concluded that business sector in Pakistan is preparing for CPEC, but with the fact that the required results are not possible till the challenges and concerns of local producers are addressed by the government in appropriate way through effective policies and efficient management. Hence, a detailed policy plan for the local industry specifying CPEC is highly recommended.