Last month, riots between Sunni and Shia groups in north-east Pakistan claimed at least 20 lives and left 50 others injured, prompting the government to deploy troops and to impose a curfew in the volatile areas.
That curfew has since been lifted in the area, which borders western China. But growing sectarian discord in Gilgit-Baltistan and Skardu districts, where the riots occurred, is likely to turn the region into a sectarian flashpoint, frustrating Chinese plans for development of its western region.
The strategically located area of Gilgit-Baltistan - which connects Pakistan to China's western province of Xinjiang - borders Afghanistan, China, India and the strife-torn Khyber Pakhtunkhwa province of Pakistan. The region is seen by both India and Pakistan as part of the larger Jammu and Kashmir issue, which has been one of the most intractable points of contention between the two South Asian rivals since partition.
The riots broke out across the region last month after protesting members of the Ahle Sunnat Wal Jama'at, also called Sipah-e-Sahaba - a Sunni militant group banned by the government in Islamabad - were attacked with a hand grenade. Soon after this incident, the violence spread to a number of towns in Gilgit-Baltistan, where rival sects exchanged fire and the killing spree continued. A crackdown is currently being launched by Pakistan's army against sectarian militant groups in the area.
But these riots were not an isolated incident. Attacks based on sectarian rivalries are on the rise across the region.
Passengers travelling in buses on the Karakoram Highway, which connects Pakistan and China across the Karakoram mountains, have been the main targets of the Islamist extremists. In February this year, 18 Shia pilgrims from Gilgit-Baltistan were killed on the highway in the Kohistan district of Khyber Pakhtunkhwa when they were returning in a bus from Iran. And in the Gilgit-Baltistan town of Chilas this month, passengers on another bus were sorted out on sectarian affiliation, pulled off and massacred.
There is an obvious worry that extremists' activities in Pakistan's border areas with China could fuel unrest and accelerate terrorist activity in China's northwestern Xinjiang province, where the East Turkestan Islamic Movement (ETIM), a militant Muslim separatist group, is already fighting for the independence of East Turkistan.
If the trend of sectarian strife in Pakistan continues it would not only be a source of strength for radical Islamist groups in China, but also a source of unrelenting trouble for Chinese authorities. Xinjiang, a region of Muslim majority Uighurs, a Turkic-speaking ethnic group, is likely to witness the growth of more radical jihadi groups and hence more Islamic militancy. For instance, Ahle Sunnat Wal Jama'at has been involved in target killings of the people of rival sect across Pakistan.
China has been complaining for some time that the export of terrorism to its western region from Pakistan's volatile tribal areas has affected its own stability. China has invested in many construction and engineering projects in the region; instability there threatens Chinese activities and economic interests.
Both Pakistan and China, will suffer if stability is not restored to Pakistan's north-east. China in recent years has sought to develop Xinjiang as a major trade and transport hub for the region, including Pakistan. The proposed special economic zone at Kashgar would develop Xinjiang into a major trading hub, allowing for more energy and economic integration with South and Central Asia.
Gilgit-Baltistan is of key importance for China's plan to set up a transportation and trade corridor by establishing new road and rail links through Pakistan to reach the Arabian Sea.
China is also interested both in monitoring the supply routes for its rapidly increasing energy shipments from the Arabian Gulf, and also in opening an alternative route via Pakistan for import and export trade serving its vast Muslim-majority west.
Pakistan is a Sunni Muslim state, while Shia are in the minority. Gilgit-Baltistan has however many Shia- dominated areas with Sunnis in the minority. Demography of the Gilgit-Baltistan area, therefore, suggests sectarian disharmony has the potential to trigger violence.
The unrest in Xinjiang is already discouraging potential foreign investors from eyeing the enormous trade potential of China's west. This reluctance to invest will only deepen, harming the economies on both sides of the border, if Pakistan's sectarian conflicts spirals further.
Syed Fazl-e-Haider (www.syedfazlehaider.com), a development analyst in Pakistan, has written many books, including The Economic Development of Balochistan