Pakistan's President Pervez Musharraf has inaugurated a controversial deep sea port in the southern province of Balochistan on Tuesday.
The Gwadar port is also to have ship building facilities
Gwadar port is on the Arabian Sea at the mouth of the Gulf through which 30% of the world's daily oil supply passes.
Officials say the port will benefit Balochistan. That is disputed by Baloch militants fighting the government.
The current estimated cost of the port project is nearly $1bn. Much of the funding has come from China.
While inaugurating the port, President Musharraf described the occasion as "a historic moment" for Pakistan.
A high-level Chinese delegation, led by Minister for Communications Li Shenglin, was in attendance.
Gen Musharraf also announced that a modern airport would be built near the port with Chinese assistance.
"The same Chinese friends will build an airport here for us, where the best aircraft will come," Musharraf said according to AFP news agency.
Gwadar is expected to provide strategic storage and transport facilities, as well as road and rail links to China.
The port is seen by observers as China's first foothold in the Middle East.
But the project, launched in 2002, has attracted a lot of controversy and opposition from national and international quarters.
String of pearls
Baloch leaders are highly critical of the project accusing the federal government of sideling locals in the distribution of revenues and jobs arising from its development.
Baloch militants often carry out bomb attacks in Gwadar
The issue, along with a similar dispute over mineral rights in the province, has erupted into a full scale insurgency between local tribesmen and government forces.
Hundreds have been killed in the fighting that has been going on since 2003.
Six Chinese engineers have been killed by Baloch militants, three in 2004 and three in 2006.
China's involvement has been viewed with hostility and suspicion not just in Pakistan, but also internationally.
The port is said to be part of Chinese naval expansion along the Asian and African coasts called the 'string of pearls' initiative, according to a US Department of Defense report.
It entails the maintenance of ports and bases at strategic places in the region.
Observers say that United States as well as the Gulf countries have major reservations at the 'overwhelming' Chinese involvement in the project.
The Gwadar port is situated right next to the strategic Straits of Hormuz and its busy oil shipping lanes.
The surrounding region is home to around two-thirds of the world's oil reserves.
It is also on the shortest route to the oil rich Central Asian states through land-locked Afghanistan.