China and Nepal: The Himalayan Interactions

Sanjay Pulipaka
Nepal Prime Minister KP Sharma Oli was back as prime minister for the third time in July this year. Oli’s tenures have often witnessed significant foreign policy shifts aimed at reducing the historically close social, economic, and political interactions with India in favour of China. Oli often sought to build close ties with China and prioritised a visit to Beijing as his first foreign visit after becoming the Prime Minister. Quite often, if not always, Nepal’s prime minister travels to India on their first foreign visit.
During his state visit to China (December 2–5), Prime Minister Oli interacted with President Xi Jinping, Premier Li Qiang and other senior leaders. The joint statement issued during Oli’s visit had the usual reiterations of the one-China principle. The joint statement also noted that “the Nepali side reiterated that Xizang affairs are internal affairs of China and that it will never allow any separatist activities against China on Nepal’s soil.”1 Both sides agreed to expedite a host of connectivity and energy projects.
Referring to the need to deepen the Belt and Road cooperation, the Joint Statement, on December 03, noted that both sides “expressed their readiness to sign the MoU on building the Trans-Himalayan Multi-Dimensional Connectivity Network and the Framework for Belt and Road Cooperation between the two Governments as soon as possible.”2 A day later, Prime Minister Oli announced that Nepal and China agreed on the Framework for Belt and Road Cooperation, which would further strengthen the economic interactions between the two countries.3 The framework agreement was signed for a period of three years and will be extended for an additional three years unless terminated by one of the parties.4 Nepal signed the Belt and Road Initiative (BRI) Memorandum of Understanding in 2017. Since then, Nepal has refrained from moving forward with the framework agreement that would have paved the way for faster implementation of various projects under the rubric of BRI. Nevertheless, despite the lack of a framework agreement, China has operationalised numerous infrastructure projects, such as airports and hydropower projects in Nepal.
Select list of projects agreed during the visit of K P Sharma Oli, Prime Minister of Nepal, to China in December 2024
- “Advance the fourth phase of the China-aided Araniko Highway maintenance project and the Hilsa-Simikot Road project, implement the second phase of the Kathmandu Ring Road Improvement Project
- Development of three North-South Corridors in Nepal, namely Koshi Economic Corridor, Gandaki Economic Corridor and Karnali Economic Corridor…[and] expedite the construction of related projects.
- Steadily advance the feasibility study of the Jilong/Keyrung-Kathmandu Cross-Border Railway
- The Chinese side will facilitate the construction of the China-aided Inland Clearance Depot (ICD) and Integrated Check Post (ICP) at Korala, Mustang.
- Development of civil aviation ties between China and Nepal and… flights between Chinese cities and Nepali cities such as Pokhara and Lumbini
- Expedite the feasibility study of the China-aided Jilong/Keyrung-Rasuwagadhi-Chilime 220KV Cross-Border Power Transmission Line.
- Welcomed the signing of the Letters of Exchange for the Approval of the China-aid Project of Feasibility Study for the Tokha-Chhahare Tunnel.”
Source: ‘Joint Statement between the People’s Republic of China and Nepal, Beijing, December 3, 2024’. Embassy of Nepal – Beijing, China, 3 December 2024.
In the run-up to Oli’s visit to China, there was considerable discussion in Nepal regarding the advisability of building massive infrastructure projects with Chinese loans. Recently, Nepal Foreign Affairs Minister Arzu Rana Deuba stated, “I have told Minister Wang Yi that Nepal is not in a position to take loans… Our discussions in China revolved around progressing with BRI projects through grants.”5 It is not certain if China would be interested in pursuing such projects only through grants. A report in the South China Morning Post noted that Nepal wanted to include references to “grants” in the framework agreement, and after much discussion, both sides agreed on the “aid help financing” terminology.6
There is an underlying geopolitical context in Nepal’s willingness to proceed with the framework agreement. For China, the BRI framework agreement provides a pathway for greater and faster implementation of infrastructure projects in a strategically important South Asian country. At the moment, transporting goods to Nepal through the high Himalayas is a costly proposition. The Chinese objective would be to create necessary infrastructure to reduce such costs. Implementing the BRI projects, specifically the connectivity projects in Nepal, will also enable China to access Indian markets through a third country.
Given the porous border between India and Nepal, Chinese goods will find easy market access in India once they reach Nepal. For Delhi, given the close people-to-people relations between India and Nepal, closing the open border is not an option. Further, a rigid border between the two countries will also reduce India’s influence in Nepal. Therefore, the economic viability of China’s proposed massive infrastructure projects will be contingent on their ability to access the Indian markets. Nepal fits the bill as an alternative route to engage with the Indian economy. At the same time, there has been disengagement along the India-China border in areas where the forces were in close proximity, and both countries are in conversations to further de-escalate tensions.
Meanwhile, US President-elect Donald Trump has threatened a trade war with China. There is also growing hesitation in many developed countries regarding economic engagement with China. Therefore, it becomes important for Beijing to scale up economic engagement with emerging economies and developing countries, irrespective of their market size.
These developments suggest that Chinese attempts to create the necessary frameworks for increased access to the subcontinental economies are steadily falling into place. Next year marks the 25th anniversary of establishing diplomatic relations between Nepal and China, and it is expected that there will be an even greater uptick in various diplomatic and cultural interactions between the two countries.
Sanjay Pulipaka is the Chairperson of the Politeia Research Foundation. The views expressed here are personal.
Endnotes
[1]‘Joint Statement between the People’s Republic of China and Nepal’. CGTN, 3 December 2024. https://news.cgtn.com/news/files/Joint-Statement-between-the-People%27s-Republic-of-China-and-Nepal.pdf
[2] ‘Joint Statement between the People’s Republic of China and Nepal, Beijing, December 3, 2024’. Embassy of Nepal – Beijing, China, 3 December 2024. https://cn.nepalembassy.gov.np/joint-statement-between-the-peoples-republic-of-china-and-nepal-beijing-december-3-2024/
[3] Oli, K P Sharma. X.com, 4 December 2024. https://x.com/kpsharmaoli/status/1864224992017437128?s=61.
[4] Giri, Anil. ‘Nepal and China Sign Framework for BRI Cooperation in Beijing’. Kathmandu Post, n.d. https://kathmandupost.com/national/2024/12/05/nepal-and-china-sign-framework-for-bri-cooperation-in-beijing.
[5]Ghimire, Yubaraj . ‘Nepal Rules out Loans for BRI Projects: Foreign Minister’. The Indian Express, 30 November 2024. https://indianexpress.com/article/india/nepal-rules-out-loans-for-bri-projects-foreign-minister-9699396/
[6] Sood, Amy . ‘Nepal’s PM Oli Strengthens Ties with China, Bypassing India’. South China Morning Post, 5 December 2024. https://www.scmp.com/week-asia/politics/article/3289559/nepals-oli-signs-belt-and-road-deal-china-amid-debt-fears-and-india-tensions.































