Nepal’s President Bidhya Devi Bhandari was on a nine-day state visit to China which concluded on April 30, 2019. The invitation was extended by Chinese President Xi Jinping. The visit coincided with the Second Belt and Road Forum in Beijing on April 27 which was actively attended and addressed by the visiting President.
Nepal’s relationship with its southern neighbor had soured in the last four years, and now a shift is witnessed in Nepal’s strategic engagement with China. In the last seven decades of its engagement with India, Nepal’s foreign policy was guided by the strong socio-cultural and ethnic commonness. In the last one decade, the dominant cultural aspect of its foreign policy is given a back-seat, and economic cooperation is on the priority. In China’s Belt and Road Initiative (BRI), Nepal seems to have found solace in its search for new economic and strategic alliances.
During the visit, President Bhandari held high-level discussion with the Chinese president and the two “exchanged substantive views on further strengthening and consolidating the ties of co-operative friendship and mutually beneficial partnership subsisting between the two countries.”
Following the bilateral talks, the two countries signed a total of seven agreements which included the Protocol to the Agreement on Transit Transport, Handover Certificate of Grant-Aid for the Repair and Reinforcement Project of the Existing China-aided Projects, Agreement on Cooperation and Mutual Administrative Assistance in Customs Matters, Memorandum of Understanding for Cooperation on Standardization, Agreement on Economic and Technical Cooperation, Minutes of Meeting on Strengthening Assistance Cooperation in the Field of Livelihood in the Northern Region of Nepal, Agreement on Preventing Theft, Clandestine Excavation, and Illicit Export-Import of Cultural Property.
Among these seven agreements, the key agreement was on China’s
economic and technical cooperation for Nepal. Under the agreement, China has
pledged RMB 1 billion (NPR 16.80 billion), out of which “20 million yuan will
be spent for development assistance and to create the headquarters in the 15 northern districts of
Nepal. The China International Development Cooperation Agency will execute the
programme. The rest of the amount will be spent on mutually agreed projects”.
On the BRI front, in the last two years of its engagement, the Government of Nepal had asked the different ministries to come up with project plans that could be developed in cooperation with China. During the last visit of Prime Minister KP Sharma Oli to China, these recommendations were given priority in the official engagements. Among the ongoing discussions, the trans-Himalayan corridor is given immense importance. Despite the looming skepticism on the feasibility of the project, the incorporation of the Nepal-China Trans-Himalayan Multi-Dimensional Connectivity Network, including cross-border railway, in the “joint communiqué of the second conference of the Belt and Road Initiative has renewed optimism in Nepal”.
Of note, construction of the railway track on the Chinese side has not reached Shigatse which is in the Tibet Autonomous Region and on the Nepalese side, the detailed project report has yet to be finalized. In this light,the trans-Himalayan corridor shall remain a projection for now.
With the new set of agreements coming into existence and projected on the lines of deepening Nepal-China engagement, previous experiences provided a different narrative, especially with regards to Beijing’s challenges in Nepal concerning BRI. At present there are more than 40 agreements that have been signed by Nepal under the BRI mechanism. However, the process on the Nepalese side in executing the plans has not been up to Beijing’s expectations. As a result, in January 2019, China had advised Nepal to cut down the number of projects. This should alarm Nepal that BRI does not mean freebies; rather, Nepal should actively act upon the agreed businesses in accordance with the agreements. Having witnessed a decade long Maoist insurgency and political instability, progress on the development front has remained minimal in Nepal.
China is not interested in providing freebies to Nepal, and the cost attached to any projects in Nepal are looked through the prism of strategic gains and financial returns.
On the other hand, the growing skepticism of Chinese intentions through the BRI is global. As per a recent report carried by US think-tanks, “sovereign credit risk ratings and World Bank sustainability analysis concluded that 23 out of 68 countries that have signed up for BRI are at the risk of debt distress. A prime example of the ‘debt trap’ is China’s acquisition of the strategic Hambantota port after the Sri Lankan government failed to service its debt”. Hence, the Chinese pledge to provide financial assistance through its newly created Chinese aid agency to create new capitals in the 15 districts of Nepal to meet their development needs requires a cautionary approach from Nepal. It is noteworthy that Nepal has for the first time raised its concerns on the “debt trap” with China. President Bhandari in her speech at the second BRI forum said that “the very foundation of cooperation and collaboration is facing skepticism. Protectionism and isolationist tendencies have surfaced.” This indicates the rising worries in Nepal despite the euphoria of deepening cooperation with China.
For China, investment in Nepal is no less than a high risk due to the political vulnerability of the country. However, Nepal is more than an investment opportunity for China, especially in the context of India. Despite several efforts by China to bring India on board to BRI, India from day one has opposed it. India has said that “the so-called ‘China-Pakistan Economic Corridor’ violates India’s sovereignty and territorial integrity. No country can accept a project that ignores its core concerns on sovereignty and territorial integrity”.
Considering India’s deep-rooted presence in Nepal, Kathmandu joining the BRI sends a symbolic message to New Delhi about the increasing outreach of Beijing. Second, as a landlocked country, President Bhandari said in her speech that “connectivity is of paramount importance in Nepal’s socio-economic development”. For now, Nepal solely relies on India for its third country trade through the Calcutta Port and the Vishakhapatnam Port. Due to its reliance on India, any disruption in India-Nepal relations affects the movement of the goods. A very recent example in this regard was the 2015 blockade at the India-Nepal border. Hence, in its search for an alternate port, Nepal has been in talks with China.
As a result, during the visit of President Bhandari, China has signed a protocol with Nepal allowing access to four Chinese seaports — Tianjin, Shenzhen, Lianyungang and Zhanjiang and three land ports in Lanzhou, Lhasa and Shigatse for third-country import. However, the absence of heavy-duty road infrastructure from Nepal to China, the high Himalayan terrain between the two countries and distance to the Chinese ports mean limited accessibility between Nepal and Chinese port facilities. Therefore, it should not be seen as an alternate mechanism to Indian ports.
On the last leg of the visit, President Bhandari paid a visit to Lhasa in the Tibet Autonomous Region. It has been the case with every high-profile delegation from Nepal that China has welcomed them with local hospitality in Tibet. While the business aspects of Tibet and Nepal are limited at present, the strategic importance of Nepal is tremendous for China, as regions like Mustang in Nepal have been crucial in the Chinese quest for maintaining peace and stability in Tibet. Her visit to Tibet further emphasizes Nepal’s commitment to the “One China” policy.
To conclude, the visit of the President of Nepal to China saw the signing of agreements similar to those signed during the visit of Nepalese Prime Minister KP Sharma Oli in 2018. However, the initial Chinese interests of executing the agreements have changed to reaffirmation due to Nepal’s failure in reducing time on feasibility studies. China is not interested in providing freebies to Nepal, and the cost attached to any projects in Nepal are looked through the prism of strategic gains and financial returns. Meanwhile, the increasing cooperation between Nepal and China shall stand as a symbolic challenge to India, rather than giving any immediate challenge to New Delhi.