IMO... I don't think the PAF AHQ was confident about designing AZM alone. I originally felt that designing the jet and using COTS inputs would've been possible, but even then, there are a lot of things we'd need to master first (e.g., flight control tech) before making serious progress in such a project.
Ultimately, the PAF was going to roll AZM into another fighter program, either from China or Turkey. I think the likelier outcome is China, and the one program available for that purpose is the FC-31. But while the two will be related, the FC-31 and J-35 are going to be distinct variants (the latter designed for naval ops, and likely costlier than FC-31 due to the necessary changes).
We should also bear in mind that the PAF wants the new fighter sooner than later. So, the only option that can qualify is the FC-31, since it is the farthest along.
Ideally, we would take on the FC-31, but separately, have a totally in-house combat aircraft program centered on developing flight control tech, composites, electronics, etc. So, while we induct the FC-31, we also build a R&D base to develop something new, like a strike UCAV, loyal wingman drones, EW/ECM decoys, etc.