Xi's New Era and Nepal

Nepal’s perception towards Chinese proximity and growing regional footprint has been a combination of hope, harmony, expectations, admiration, hesitation and uncertainty which has marked the character of Nepal-China relations since the Nepal-China Peace Agreement of 1792. However, through Chinese President Xi’s “new era”, China has demonstrated more clarity on its Nepal policy by active engagement. From high-level visits to tourism, China has been critical in developing infrastructure in Nepal such as hydropower stations, telecommunication networks, roads, training centers, airports, and restaurants.  Nepal’s northern neighbor has increased its presence in the country and deepened the economic engagement between the two nations.

China and Nepal revised their Bilateral Air Service Agreement in 2014 which enabled the two countries to increase flight frequency to roughly 70 per week, and to add more destinations and airlines. Nepali carriers can operate direct flights to Beijing, Kunming, Guangzhou, Shanghai, Chengdu, and Xi’an (also Lhasa and Hongkong). China Southern, China Eastern, Air China and Sichuan Airlines operate regular flights to Kathmandu from different Chinese cities. Kathmandu is the only international destination that has a direct flight connection to Lhasa. Air China runs daily round trip flights – Lhasa-KTM-Lhasa. China’s CAMC Engineering Co. Ltd. and the Northwest Civil Aviation are constructing the Pokhara Regional International Airport and the Lumbini International Airport respectively. China’s Export and Import (Exim) Bank has loaned $ 214.72 million for the Pokhara airport construction. Regarding the expansion of Qinghai-Tibet railway to the border of Nepal, Chinese companies have been conducting feasibility studies, and the Communist Party of Nepal- United Marxist Leninist’s leader K P Oli campaigned on the promise to bring a train from China.

An increasing number of Chinese tourists, second only to Indian visitors, has provided much-needed relief for Nepal’s travel entrepreneurs.  Demand for Mandarin-speaking guides dramatically rose and Chinese language institutes have mushroomed nationwide.  A few existing Mandarin speakers have made a fortune as travel guides. The Chinese citizens, who had begun to enter Nepal in the early 1980s for careers in industrial production or hospitality, are now in restaurant business as well.

China is involved in cement factories, telecom companies, hydropower projects, in addition to reconstructing quake-damaged popular heritage sites in Kathmandu. Shanghai Zhongji Investment Holdings Chinese has proposed an infrastructure development bank in Nepal to facilitate many Chinese firms working in different sectors there with an offer of free shares amounting to  $ 195.2 million to the Nepal government. In the recent visit, officials from the Lhasa Economic and Technology Investment Zone have proposed $ 3.25 billion industrial park in the Jhapa district of eastern Nepal (K P Oli’s district) as part of China’s Belt and Road initiative. China has given financial gifts such as military equipment and the construction of training center to the Nepal Armed Police and the Nepal Army respectively, and has built civil service hospitals and educational institutions

China’s Huawei and ZTE have dominated Nepal’s telecom industry as the nation’s giants Nepal Telecom and Ncell operate on their technology.  Huawei has also bagged the Nepal Telecom contract in providing ten million cell phones in the country. They have also tendered Nepal Telecom’s $ 312.32 million project of 4G coverage expansion at a lower price, which has increased their chance of winning the bid on the project. Recently, Nepal Telecom and China Telecom Global have worked together to overcome Nepal’s dependence on India for internet service by building additional fiber optic cable connections.

Additional economic plans include the building of factories and the improvements to infrastructure. Chinese Hongshi and Nepal’s Shivam and already signed a $359.18 million Joint Venture Company (which has also provided jobs for over 1000 Nepalis) with the daily production capacity of 12 thousand tons of cement. The Chinese firm Huaxin plans to build cement factory, and   Shanghai Construction is building an expansion to Kathmandu’s ring road. Over 60 Chinese firms have registered this fiscal year in the Department of Industry pledging up to $ 8 billion in various projects throughout the country.

China has also been building additional infrastructure projects that allow Nepal to tap domestic renewable energy sources.  Many hydro power projects contracts have gone to Chinese firms. Several of them such as the Power China Resources Ltd., Three Gorges, China Gezhouba Group Corporation (CGGC), Sinohydro are working in many hyrdro projects from 14 MW to 456 MW capacity.  Chinese firms have also received the contract for civil, hydro-mechanical and hydro-electrical works for the projects with investment other than Chinese. In this way, Chinese firms have bagged projects such as Kulekhani -3 14MW (civil), Nyadi 30 MW (civil, hydro-mechanical-electrical), Chameliya 30 MW (civil structure), Sanjen, Bhotekosi, Tamakosi 456 MW (civil) and Rasuagadhi. The Power China Resources Ltd. recently completed the 50 MW Upper Marsyangdi Hydropower Project. The Human Allonward supplies equipment to Nepal. Many other joint hydro projects between China and Nepal are being considered as well.

China’s growing engagement in Nepal is not unique to China-Nepal relations but a part of China’s new global approach, exemplified by its newly introduced Belt and Road initiative. However, the sensitivity of the Tibet issue in Nepal adds a unique flavor to this relationship. After the pro-Tibetan protests ahead of the 2008 Beijing Olympic, Nepal’s importance grew for China incentivizing Beijing to increase its outreach to the Nepali security agencies. However, many questions remain unanswered, such as: to what extent is China willing to go in terms of influencing Nepal’s politics? To what extent Nepalese stakeholders can rely on China or is it a good idea in the first place? Nikkei Asian Review’s commentator Hiroyuki Akita in Tokyo says: “By conducting a smart strategy Nepal can have a favorable relationship with both [India and China] by letting them compete over Nepal. However, this strategy also contains huge risk because that alienates both India and China. “