First of the PAF designation for J-10 is FC-20 & the specifications told about it by no other then PAF Cief himself are much more advanced then the current configuration the operational J-10s have as this aircraft is going to come around 2014-2015 in PAF service, enough time of about 5 years to upgrade the J-10 to a true 4.5th gen capability.
" ACM Qamar said the PAF has finalised the technical proposal for the FC-20 and informed the Chinese of its requirements."[The technical proposal] is more or less finalised now. There are some changes that are required, which [the Chinese] are making," he said.
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The next stage of the contract will involve financial negotiations between China and Pakistan. ACM Qamar believes that, following the signing of a contract, it will take two to two-and-a-half years before the first FC-20 aircraft is received"
Further Reading:
And the reason for PAF to go for JF-17 is it needs to have medium tech & high tech combination as no air force in the world is fully equipped with high tech planes only, these is always a combination of medium-high tech aircrafts & PAF main focus is IAF as an adversary, we have to counter them. Plus, the true capability of JF-17 in terms of its fighting potential is still not revealed & it has much much room for further improvements & upgrades. Western Avionics are still on the table for it & engine change a possibility too. JF-17 has a very promising potential to become a true high tech aircraft in future.
PAF & China are not stupids to have gone with JF-17 when J-10 was around, there must be some reason to it, which the people at PAF & China understand better then all of us over here speculating.