Last week, during a visit to India, Nepalese Prime Minister K.P. Sharma Oli shot down accusations that he was playing his “China card” in order to irritate India. A month earlier, Oli had threatened to begin 2016 by visiting China first, against tradition. His announcement came after a five-month standoff between India and Nepal. Kathmandu had accused New Delhi of supporting a group of protestors from the Madhesis ethnic group, which is of Indian origin and makes up 30 percent of Nepal’s population. In Nepal, some of the Madhesis had used trucks and cars to close off the border and essentially impose a blockade against crucial imports of medicine and food from India. They wanted Nepal, which had adopted a new constitution in September, to give them more rights. India had unofficially encouraged Nepal to revise its constitution and Nepal, in turn, accused it of interfering. A few days before Oli’s visit to India, however, the Madhesis called off the blockade after Nepal promised to amend the new constitution.

The majority of Nepalese feel that India does have too much power over the internal politics of Nepal. Subin Mulmi, a Kathmandu-based human rights lawyer, told me that Nepali leaders even seek permission from India before making any major political decisions. “The prevalent anti-India sentiment has resulted in the people generally preferring China,” said Mulmi. China, which seeks to improve trade relations with South Asian countries, has shown ample interest in Nepal. In 2005, after King Gyanendra came to power in Nepal, and just a year before the civil war ended, China dispatched ammunition for the first time to help the government fight the Maoist rebels. China’ assistance came after India, the United States, and the United Kingdom suspended military aid. In October 2015, at the height of the protests by the Madhesi, China opened the border crossing point at Jilung, which links Tibet and Nepal. It was used to transport petroleum products and other essential items. From November 10 to December 10, China exported nearly 6,000 tons of cargo, valued at $43.5 million, to Nepal.

Nepal's Prime Minister Khadga Prasad Sharma Oli (L) shakes hands with his Indian counterpart Narendra Modi in New Delhi, India, February 20, 2016.
Adnan Abidi / Reuters

In December 2014, China increased its official aid to the country by more than five times—from $24 million to $128 million between 2015 and 2016. This increase may have had to do with China and India’s ongoing race to expand their trade relations with neighboring countries and their competition for regional hegemony. As a result, control over Nepal has gained strategic significance. Even in development aid for Nepal, both countries have sought to outdo each other. China promised to build $1.6 billion worth of electricity infrastructure in Nepal. Earlier, India had promised $1 billion in soft loans for Nepal’s infrastructure projects.

Nearly a year later, in November 2015, Nepal began accelerating the development of its northern trade routes with China, such as the expansion of the Dhulekhel–Tatopani section of the Araniko Highway. It was built in 1970 with Chinese assistance, but it has been closed since the earthquake. The plan is to convert it from a two to four-lane highway, a project that Yi and Thapa discussed during their December meeting.

A month later, in December, Nepal gave China the go ahead for its plans to build an inland container depot—a sort of dry port for the landlocked country—at Timure of Rasuwagadhi near the China–Nepal border. China will build the depot for free. The facility will be spread out over roughly five hectares of land and include a customs checkpoint and warehouses for importers and exporters to temporarily store goods. The depot will be located only 16 miles away from the Nepalese city of Kyirong, where China intends to extend its Qinhai–Tibet Railway.

At the end of the month, on December 25, China and Nepal held historic talks in Beijing. During the five-day visit, Nepalese Deputy Prime Minister and Foreign Minister Kamal Thapa met with Chinese Foreign Minister Wang Yi to discuss trade and other shared interests. The two countries agreed on opening more border points for transit trade, arranging a permanent supply of petroleum from China to Nepal, and drafting a transit treaty to enable Nepal to access Chinese ports. China also pledged to provide 1.4 million liters of fuel for emergency needs and $500 million in post-disaster reconstruction to Nepal, which is still recovering from its devastating earthquake in April 2015.

China's Premier Wen Jiabao poses with Nepal's Prime Minister Dr. Baburam Bhattarai, January 14, 2012.
Bikash Dware / Reuters

China’s ambitions in Nepal aren’t just related to trade. Former Nepalese ambassador to the United Nations Jayaraj Acharya told me that China’s interest in Nepal is also related to security, given Nepal’s proximity to Tibet. “It wants Nepal to control Free Tibet or anti-China activities that may be sponsored by Western powers in Nepal,” he said. In April 2014, a Human Rights Watch report revealed that Nepal had essentially banned Tibetan refugees from protesting against China by using excessive force, arbitrary detention, intimidation, and intrusive surveillance against them. “While good relations with China are important, restricting basic rights crosses a red line. It only undermines efforts to uphold a very fragile rule of law in Nepal. It also encourages politically motivated policing and impunity for abuses,” the report noted. China even “gifted” Nepal in December 2015 with plans for a police academy in Nepal where China could train Nepalese ground officers who guard districts bordering Tibet.

However close Nepal and China may get, China might be the bigger winner in the relationship. Nepal’s tactic of angering India by moving closer to China might not actually work that well. India is still, and will remain for some time, Nepal’s largest trade partner. “By playing the Chinese card, Nepal has exposed a hollowness of this card for the simple reason China cannot be an alternative because of geography and costs,” said Prashant Jha, author of Battles of The New Republic: A Contemporary History of Nepal. Nepal is surrounded by India on three sides, making trading routes with India less expensive than with China. Furthermore, the trade routes with China lie in rough terrain and so are often damaged by bad weather or natural disasters. The recently reopened route at Jilung had been previously destroyed by the 2011 earthquake in Nepal.

Because of India’s leverage, it can punish Nepal whenever it gets too close to China. Back in 1989, India imposed a 15-month long economic blockade after Nepal bought antiaircraft guns from China in August 1988. At that time, India denied access to port facilities in Calcutta, which drove Nepal into an economic crisis—its GDP growth rate dropped from 9.7 percent in 1988 to 1.5 percent in 1989.

The best case scenario for Nepal is if it learns how to appease both countries rather than use them to irritate each other. China and India are each other’s major trading partners. In 2000, bilateral trade between the two was just under $3 billion compared to $100 billion in 2015. Subedi noted that given its strategic location, Nepal could serve as a site for building stronger trade and transit relations between China and India, and perhaps incorporate itself into that trading relationship. “That will be a win–win situation,” said Subedi. “And that is how Nepal wishes to be seen itself rather than playing one neighbor against the other.”

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  • FAHAD SHAH is a journalist and Editor of Of Occupation and Resistance: Writings from Kashmir. He is also the Founding Editor of the magazine The Kashmir Walla.
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