Nepalese Prime Minister’s Visit to China: Should India Worry?
Photo Credit: Reuters
By Rishi Gupta

Nepalese Prime Minister’s Visit to China: Should India Worry?

Jun. 26, 2018  |     |  0 comments

Nepalese Prime Minister Khadga Prasad Oli concluded his six-day official visit to China on June 24, 2018. This was his second state visit since assuming office as the Prime Minister in February. The visit is seen along the lines of building comprehensive cooperation between Nepal and China. Besides Beijing, Oli also visited Lhasa, the capital of the Tibet Autonomous Region of China. During the visit, Oli met President Xi Jinping, Premier Li Keqiang, and Li Zhanshu, Chairman of the Standing Committee of the People’s Congress of China, amongst other important stakeholders in the government.


Oli had visited China in 2016 during his previous nine-month term as Prime Minister, during which he signed several important agreements with China. However, a number of agreements failed to materialize after the Maoist Party Chief Pushpa Kamal Dahal a.k.a. Prachanda withdrew support from the Oli administration for differences over power-sharing. While the Prachanda administration was seen as close to India, surprisingly, on May 12, 2017, before the expiry of Constituent Assembly, Prachanda agreed to be part of China’s Belt and Road Initiative (BRI). Importantly, the decision was executed just two days before the first BRI Forum in Beijing on May 14, 2017 — probably to avoid diplomatic pressure from its southern neighbor.


On his recent state visit, Oli was accompanied by a high-level delegation comprising of ministers, diplomats, businessmen, entrepreneurs, CEOs, and journalists. Much as anticipated, the visit has seemingly had productive results for the two sides. A total of eight MoUs were signed between Nepali agencies and enterprises and their Chinese partners, in the areas of hydropower generation, manufacturing, river training and agriculture — in total worth USD 2.4 billion — including an agreement for cooperation between the Nepal Electricity Authority and the State Grid Corporation of China for a feasibility study of the Nepal-China Cross-border Power Grid Interconnection Project, including the 400 KV Kerung-Rasuwagadhi-Galchhi-Ratmate transmission line. These were followed by another set of fourteen MoUs at the government level. The overall emphasis of the visit was centered on improving connectivity and developing hydropower in Nepal.


In 2016, Prime Minister Oli had signed a transit trade treaty which included railway connectivity with China. In due course, progress on the agreement was halted later that year after the Oli government collapsed. Interestingly, during this recent visit, the two sides again discussed developing a railway corridor between their two countries. Oli in an interview with the Global Times emphasized that this railway is just one amongst the many priorities of his administration. The agreed trans-Himalayan railway line will connect Gyinong in Tibet to the capital town of Kathmandu in Nepal and extend up to Lumbini, a border town of Nepal with India. China has completed a railway line up to Xigaze in Tibet, and it might take three more years for China to reach Gyinong. The railway project is seen as very critical to India’s security establishment since it reaches close to the border between India and Nepal. However, India has made no official statement, and unease is reflected through Indian media in this regard.


Apart from the railway, agreements on the reconstruction of Friendship Bridge and Resuo (Rasuwa) Bridge, and the protocol on the utilization of highways in the Tibet Autonomous Region were agreed upon by the two sides. These two projects are part of the development of a multidimensional trans-Himalayan connectivity network to enhance overall connectivity between Nepal and China.


Notably, Nepal has been in search of an alternative transit route through China after it suffered a three-month-long economic blockade. The government of Nepal had alleged that India was responsible for the blockade which had affected essential supplies to the land-locked nation. India denied the allegations, but the event resulted in a diplomatic crisis between Nepal and India. Having observed an anti-India wave, Oli utilized it as an opportunity to fulfil his political agenda. The desperation to increase connectivity with China and allow more Chinese firms to develop hydropower projects in Nepal carries a clear message for New Delhi to revisit its Nepal policy. The rising trade deficit, slow pace of work on development projects, and rebuilding trust remain important challenges for India.

The visit might provide further success in trade, transit, energy and strategy between Nepal and China. India needs to take note of the faults in its existing Nepal policy and consider that the Himalayas are more penetrable now than ever.

Further, considering Nepal’s abundant water resources and their feasibility to generate electricity, China is inclined towards larger investments. On this visit, five out of the eight MoUs were directly linked to the development of hydroelectricity in Nepal. In 2017, China suffered a setback when the Nepalese government canceled a major hydropower project given to the Gezhouba Group to build a 1200 MW hydroelectricity plant on the Budhi Gandaki River. The cancelation led to a diplomatic churning. Later, the government decided to complete the project with domestic funding to avoid anger from any of the project’s investors.


China’s cooperation with Nepal has flourished because the latter has the political stability and welcoming leadership that makes the govenment willing to shift from the Indo-centric nature of Nepal’s foreign policy, China is well aware of the fact that it cannot overlook India. Therefore, China has been attempting to pitch for trilateral cooperation between China, Nepal, and India. On day one of Oli’s visit to Beijing, the state-owned Global Times ran a headline which warned India to be wary of a “zero-sum mentality” in Nepal along with a subtle call for possible trilateral cooperation.


China had previously deployed a series of efforts through policy projections that have equally been endorsed by Nepal. In 2012, the Chinese ambassador to Nepal proposed a potential economic trilateralism with India in Nepal. He emphasized that India-China cooperation could provide a vast market common to both India and China which could be extended to other South Asian countries. The idea received the equivocal support of former Prime Minister Prachanda during his visit to India in 2013. Strategically, China has made similar attempts to find common ground with India. The most recent efforts include Chinese attempts to bring India on board with its ambitious BRI. At the first BRI Forum in May last year, China went all out to pursue India to join the initiative. However, India has made its position clear that it cannot be part of the BRI because it ignores India’s core concerns on sovereignty and territorial integrity. The China-Pakistan Economic Corridor (CPEC), a major BRI project which passes through Pakistan occupied Kashmir (PoK), violates the territorial integrity of India. Hence, the prospects of trilateral cooperation on the lines of the BRI have failed to materialize.


The idea received a further boost from Prime Minister Oli. He conveyed that Nepal can “serve as a bridge between our two neighbors, it wants to move from the state of a land-locked to a land-linked country through the development of adequate cross-border connectivity.” Although India has its reservations on trilateral cooperation through the BRI, it does not stand in complete denial of cooperation under other multilateral platforms. India hence invited Nepal to take part in the BRICS-BIMTEC outreach summit, held on the sidelines of the 8th BRICS summit in Goa last year. At the summit, Indian Prime Minister Modi, the then-Prime Minister Prachanda of Nepal, and President Xi met together to discuss potential cooperation in sectors like trade and investment. However, it is unlikely that effective trilateral cooperation will be in place as China would want to make the BRI the primary platform to facilitate it in the longer term.


Compare to his predecessors, Oli’s outreach to China has been tremendous. From a business point of view, “China contributed to around 87 percent of foreign direct investment commitments received by Nepal during the first ten months of the current fiscal year that began in mid-July 2017,” followed by India at second place. Further, the kind of impression that Oli has been able to put forward — with promises made to smoothen the administrative process for businesses, and ideological similarities between Nepal and China — has given him leverage to build a new partnership with China. On the other side, the massive rise in Indian fault lines since 2015 has helped China to place itself firmly in Nepal.


Other than business, Nepal and China are closely working towards building a strategic partnership. In this regard, Nepal and China held a joint military exercise in 2016 for the first time. During Oli’s recent visit, Nepal and China also committed not to allow their soil to be used against each other. They also “agreed to negotiate the Treaty on Mutual Legal Assistance in Criminal Matters and Treaty on Extradition, to strengthen cooperation on the administration of border areas and fight against illegal border crossing and transnational crimes.” It is worth recalling that the Nepalese government has extradited Tibetan refugees who fled to Nepal across the Nepal-China border. These extraditions will bind Nepal to criminalize such activities and extradite other refugees to China. Hence, the visit might provide further success in trade, transit, energy and strategy between Nepal and China. India needs to take note of the faults in its existing Nepal policy and consider that the Himalayas are more penetrable now than ever.

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