Nepal Prime Minister Sharma Oli is visiting China from December 2 to 5, leading a delegation of 78 members.

Nepal sought to balance its relationship with India by expanding ties with China, but it received little substantial benefit from Beijing in return.

High on optics but low on substance, Nepal Prime Minister KP Sharma Oli’s visit to China from December 2 to 5 signifies an attempt to balance relations with India. Over the past decade, China has intensified its influence in Kathmandu through close political ties with communist parties, along with promises of infrastructure projects, trade agreements, tourism, and more.

Sharma Oli is heading a 78-member delegation during this official visit. Although he has previously visited China as Prime Minister, this marks the first time he has bypassed the traditional destination of New Delhi. During his visit, he met with Chinese Premier Li Qiang, President Xi Jinping, and legislative head Zhao Leji.

On December 3, Nepal and China announced a nine-point agreement related to various projects, including the Tokha Chhare tunnel to connect with the Tibet border, enhancement of trade, the completion of the nine-storey Basantpur Durbar (which was damaged during the 2015 earthquake), the export of buffalo meat, Chinese language assistance amounting to $41 million, the dispatch of Chinese language teachers, and economic and technical cooperation, as well as media exchanges.

At the heart of these agreements lies uncertainty regarding the Belt and Road Initiative (BRI) projects. Nepal signed onto China’s BRI in May 2017 with 35 projects planned. However, political consensus in Nepal has been elusive due to China’s “harmonious clause,” which implies stringent Chinese control over policy coordination.

Learning from the economic collapse in Sri Lanka in May 2022 and the example of the Pokhara airport—built with a Chinese loan of $216 million but now not used for international flights—Nepal has opted for grants over loans from China. Despite this, China continues to apply pressure, seeking to build a railway connecting Tibet to Kathmandu at a cost exceeding Nepal’s GDP.

Other projects not included in the BRI have also faced controversy. For instance, the Budhi Gandhak dam project was initiated by former PM Dahal in 2017 with a Chinese company, Gezhouba, but subsequently canceled by the next PM, Deuba, in 2017. It was renewed by PM Oli in September 2018 but again scrapped in April 2022 when Gezhouba Co.’s license was revoked.

Similarly, in February 2012, Nepal signed a contract with China’s Three Gorges International Corp for the construction of the 750-megawatt West Seti dam, with an investment of $1.6 billion planned by 2019, but this was canceled in September 2018. During the execution of dam projects, costs also escalated; for the Budhi Gandhak, costs rose from $2.5 billion to $3 billion, amid environmental protests and allegations of corruption.

A significant aspect of Nepal’s relationship with China involves the telecommunications sector, which grants China considerable control in Nepal. The government-owned monopoly, Nepal Telecom, has awarded contracts to two Chinese telecom companies—ZTE Corporation for mobile data services in the Kathmandu Valley and Huawei for the rest of Nepal. Additionally, a Chinese company, Asian Info, provides maintenance services. Ultimately, China aims to integrate Nepal into its “digital silk road” initiative as part of the Trans-Himalayan Multi-Dimensional Connectivity Network.

This week’s agreement also includes the dispatch of Chinese language teachers. Nepal has previously established a Confucius Institute at Kathmandu University in collaboration with Hebei University of Economics and Business since February 5, 2007. Many Chinese tutors have visited Nepal since then. Globally, China has set up over 500 such institutes or classrooms, although some have been shut down by American and European universities due to various concerns. The new agreement will facilitate the influx of more Chinese language teachers into Nepal.

However, bilateral relations remain fraught with challenges. While Chinese tourist inflow has increased, Nepal has faced issues with e-payments on Chinese social networking sites and financial fraud, straining its economy. Additionally, China’s Ambassador Chen Song’s criticism of a Nepalese journalist regarding the Pokhara airport project has not been well received in Kathmandu.

Nepal continues to grapple with a substantial trade deficit with China, amounting to less than $2 billion annually, and Chinese investments in Nepal have not shown a significant upward trend. For long periods, the two main border trade routes—Rasuwagadhi-Kerung and Tatopani-Zhangmu—have been closed due to the 2015 earthquake, the pandemic, or landslides. Moreover, Nepal receives very few remittances from China.

Although Nepal has engaged in Chinese-led initiatives such as the BRI, the Xizang-Himalayan grouping, and the Bo Ao Forum for Asia, it has often felt abandoned, leading to a distancing from its historical, cultural, and religious ties with neighboring countries. Nepalese officials also realize that despite agreeing to China’s condition that Tibet is an “inalienable” part of China, which has pressured Tibetan refugees, Kathmandu has received little in return from China.

The author is a professor of Chinese Studies at JNU. The opinions expressed in the above piece are personal and solely belong to the author. They do not necessarily represent the views of Gyantarkash.

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Reference- Nepal PM Oli’s visit to China