Chinese multinational Shanghai Electric is set to buy the utility serving Pakistan's biggest city of Karachi, in a $1.6 billion deal that will be the biggest private-sector acquisition in the country's history.

China is stepping up investment in its South Asian neighbour as part of a $46 billion project unveiled last year that will link its western Xinjiang province to Pakistan's Gwadar port with a series of infrastructure, power and transport upgrades.

"We have received the public announcement of intention for acquisition of up to 66.4 percent of the shares of K-Electric Limited by Shanghai Electric Limited," a Pakistan Stock Exchange notification said.

The Karachi Electric Corporation, set up in 1913 as a public-sector company, was sold to Saudi Arabia's Aljomaih Group in 2005, who in turn sold it to the UAE's Abraaj Capital.

"Chinese interest is tremendous in Pakistan and the new deal would be quite attractive to strengthen cooperation under CPEC," said Taha Javed, director of research at Alfalah Securities, referring to the China-Pakistan Economic Corridor.

"It is the largest ever private-sector acquisition in Pakistan," said analyst Zeeshan Afzal, executive directer at Insight Securities.

Pakistan suffers from major power shortages that sap economic growth. Analysts hope the Chinese acquisition can improve the utility's efficiency and reduce blackouts.