Nepal's Delicate Balancing Act Between China and India

Nepal's Delicate Balancing Act Between China and India
Photo Credit: AP / TPG Images

What you need to know

Ties between Nepal and China have been on the upswing, particularly when it comes to trade, investment, and regional connectivity. But Beijing's growing clout in the Himalayan country has stoked concerns in India.

By Ankita Mukhopadhyay

The Kathmandu Post, an English-language newspaper in Nepal, ruffled Chinese feathers in February when it published an article criticizing Beijing's handling of the COVID-19 outbreak. The article blamed China's authoritarian political system for contributing to the spread of the virus and turning it into a pandemic.    

The Chinese Embassy in Nepal spared little time in putting out a statement condemning the Kathmandu Post for its scathing editorial. The embassy threatened to take further action against the newspaper and singled out Anup Kaphle, its editor-in-chief, for being "biased on China-related issues."

China's harsh response toward the Nepali newspaper came at a time when Beijing has greatly ramped up its investments in Nepal. The Kathmandu Post has alleged that Chinese aid to Nepal comes with "strings attached."

Kapil Shrestha, professor of political science at Tribhuwan University in Kathmandu, agreed with the paper's view. "Nepalis interpret the embassy's statement as an unwarranted interference in the sovereignty of Nepal. It's an act of intimidation to the extent that it blackmails Nepal," Shrestha told DW.

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Photo Credit: AP / TPG Images
A man carries a Nepalese flag as he stands outside his stall in Kathmandu, Nepal, Wednesday, September 16, 2015. 

Beijing's growing clout

In the current fiscal year, over 90 percent of foreign direct investment (FDI) in Nepal is from China. Beijing pledged nearly US$500 million in financial aid to Nepal in October last year when Chinese President Xi Jinping visited the Himalayan country.

China has already pumped millions of yuan into infrastructure and hydropower projects in Nepal. Both countries share ever closer trading relations and Nepal has signed up for the Belt and Road Initiative (BRI), a Beijing-led gigantic infrastructure program that includes the building and upgrading of transportation and commercial links.  

"China is a rising power and it is looking to project its power primarily through investments. China is sharing its prosperity with smaller countries like Nepal and these countries are trying to maximize benefits from China," K. Yhome, a senior fellow with the Observer Research Foundation, a Delhi-based think tank, told DW.

However, with big investments comes big influence, particularly if the investor is China. Nepal, whose economy relies significantly on trade, has a growing trade deficit with China. This gives Beijing leverage over Nepal, say observers.  

Akhilesh Upadhyay, a Kathmandu-based journalist who follows Nepal-China relations, believes that one can't draw a dichotomy between economic and political power. "Nepal is benefiting from strong trade ties with China, and this is benefiting both countries," he told DW.

"We should look at Nepal-China trade and investment as a win-win situation for both countries. One area that Nepal needs to continue to work in is improving its trade deficit. The government has to negotiate the best deal so that we can increase our exports," he added.

"India and Nepal also have good trade relations. Culturally and in terms of shared values, India and Nepal are quite close and it will be difficult for China to replace India in that sphere," Upadhyay stressed.

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Photo Credit: Reuters / TPG Images 
India's Prime Minister Narendra Modi (2nd R) greets his Nepalese counterpart Khadga Prasad Sharma Oli (2nd L) and his wife Radhika Shakya Oli (L) during Oli's ceremonial reception at the forecourt of India's Rashtrapati Bhavan presidential palace in New Delhi, India, April 7, 2018.

Nepal, Tibet, and trade routes 

For decades, Nepal has been dependent on Indian ports for its commerce, with two-thirds of goods to and from Nepal passing through them. In a bid to cut back on this reliance, Kathmandu signed a transit protocol with Beijing last year.

The protocol, which came into force on February 1, gives Nepal access to four seaports and three land ports in China. The protocol was inked just months after India lifted a blockade on the supply of essential items such as fuel and medicines to Nepal. India had imposed the blockade after Nepal refused to make amendments to its constitution.

The transit protocol, which will reduce the time spent on bringing goods into Nepal, has been met with mixed reactions in the country. "The new transit protocol gives Nepal the alternative to use China's ports if there is any altercation with India. The transit protocol is also seen as a political achievement for the government," Prakash Bhattarai, a former Asia Global Fellow at the University of Hong Kong, told DW.

However, the border between Nepal and China is expected to become more porous with the agreement. This is an issue for Tibetans, who try to escape China by entering Nepal, say experts.


This article was originally published on Deutsche Welle. Read the original article here.

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