China’s Nepal Game: Oli’s Visit and Thereafter

11 Apr, 2016    ·   5016

Dr Bhartendu Kumar Singh looks at why strategic, and not economic considerations, propel China's Nepal policy

It is not economic but strategic considerations that propel China’s policy towards Nepal. This hypothesis was  reaffirmed when Nepalese Prime Minister KP Oli visited Beijing recently between 20-27 March 2016. During the visit, although China doled out attractive economic packages to Nepal, beneath the benevolence, China seems to have strategic designs meant to give it long-term advantages.

The contextual environment of Oli’s visit to China was quite important. Nepal has just adopted a new constitution, which is not acceptable to the Madhesi people in the Terai region. The protesters blocked the import of goods from India, thereby creating an economic crisis in the landlocked country. Nepal had been looking to China for help. Two mainstream political parties with left leanings have been clamouring for a tilt towards China. There were expectations that China would exploit the situation to its advantage and lend a shoulder to Nepal. China has indeed, as the outcome of the visit reflected in the joint statement and a series of bilateral agreements between the two countries.

The transit deals for ports promises better road connectivity both within Nepal and near the Sino-Nepal border, which are advantageous propositions for Nepal. China has also promised to provide more money as grant assistance in the next three years to complete as many as 25 infrastructure projects. China’s promise to reduce Nepal’s trade deficit in bilateral trade as well as explore the possibility of a Free Trade Agreement (FTA), apart from promoting various other projects under the ‘One Belt One Road' and the ‘Silk Road’ initiatives, also sound very attractive to Nepalese policy-makers. China has also decided to train 200 Nepalese as Chinese translators and send planeloads of tourists to various parts of China to boost Nepal tourism.

From the Chinese perspective, these are small investments, despite the fact that Nepal is not a big market or has a thriving population with a healthy purchasing power. Nepal, however, is too dependent on its southern neighbour. China would like to reverse this dependency and pull Nepal northwards. In return, China would extract a political dividend from Nepal through strategic accommodation and greater support for Chinese policy towards the South Asian sub-continent.

The highlight of the visit was China’s decision to help Nepal in the development of internal rail lines as well as the extension of the Qinghai-Lhasa-Shigatse rail line to Nepal’s border. The rail link from Lhasa to Shigatse has already been completed and it is being extended further up to Gyirong, near the Nepal-Tibet border. The Chinese side feels that extending it towards Nepalese territory would not be a problem. Economically, it may not make sense since there would be little economic returns from the endeavour. Also, it may not ease up Nepal’s problem of cheaper imports via Chinese transit routes since the transportation costs would be simply too high.

However, China may not look at financial benefits of the proposed rail line and may take up the project in the next few years for certain strategic reasons. First, China's involvement in so many rail projects along with other capacity-building projects provide it a visible presence in Nepal right up to the Terai region. China has already started a feasibility study on a 171 km Kathmandu-Pokhara rail line. The number of Chinese technicians and project workers is already quite high and is likely to increase in the near future. China could leverage this position and indulge in large-scale prying in and around the southern cities of Nepal. Nepal’s porous border in the south only makes China’s task easier.

Second, the railways will bring new connectivity between the two countries, making Nepal an attractive destination for Chinese tourists. Even today, one can easily find many Chinese tourists roaming around border cities like Janakpur, Birgunj and Biratnagar. Third, Chinese strategic and logistics consolidation in Tibet, aided and abetted by possible rail corridors from north to south, will only increase the possibility of a Chinese military advance through Nepal towards the Gangetic plains in case China wants to take the shortest route, since the Indo-Nepal border is completely open and poorly secured. 

A major disadvantage for China is the socio-cultural affiliation of a large segment of Nepalese population with India. Nepalese are scattered across India: schools, colleges, universities, technical institutions and even government. They form a major source of labour supply and foot soldiers through the famed Gorkha regiments. Nepalese citizens have free movement across India and virtually enjoy semi-citizenship. China is not in a position to replicate Indian benevolence, at least in the near future, and it will take courage and conviction to provide similar privileges. With or without Chinese investments in rail and other infrastructure projects, Nepalese citizens would continue to look towards India. Can China overcome this dependence and lure Nepal into its complete sphere of influence? That’s perhaps the biggest strategic challenge for China.

Views are the author's own.