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The recent visit of Xi Jinping, the President of China, to Nepal can be a game-changer for the small Himalayan nation. Before this, Jiang Zemin was the last Chinese President to visit Nepal in 1996. The two countries signed several agreements on infrastructure projects. The present government in Nepal, led by KP Sharma Oli, is maintaining a pro-China stance.

Nepal’s gain from the pact

Nepal and China signed 18 Memorandum of Understandings (MoUs) and two letters of exchange for sectors like transport, agriculture, industry and commerce. China announced extensive support for various connectivity projects between the two countries. Xi was quoted as saying, “We want to support Nepal in realising its dream to become a land-linked country from a landlocked country.”

Xi said that China will provide assistance to the tune of 56 billion Nepalese rupees over the next two years to help Nepal’s development programmes. China will also support the construction of a tunnel road through the Himalayas connecting Kathmandu to Kerung, a town near the Chinese border. The Chinese President also stated that Chinese authorities will also help to upgrade the Arniko Highway linking Kathmandu with the Tatopani transit point, which was shut down after the earthquake of 2015. The two countries signed a preliminary agreement on the long-awaited rail link project connecting the Tibetan capital Lhasa to Nepal’s capital Kathmandu. Additionally, there were 19 other agreements that were signed between the two countries. Nepal, which borders Tibet and northern India, has been the preferred choice for China’s One Belt and One Road (OBOR) initiative that would link China with other parts of the sub-continent.

India’s concern

Nepal is a home to around 20,000 Tibetan exiles and every year the county confronts around 2,500 illegal Tibetan crossings. They mostly cross the border to meet the Dalai Lama at Dharamshala. Among the more sensitive issues on the table between Xi and K.P. Sharma Oli, Prime Minister of Nepal, is the signing of an extradition treaty that could allow China to remove Tibetan refugees from Nepal. It can escalate the chances of their transit to India which will create another problem. Imankalyan Lahiri, Associate Professor of International Relations in Jadavpur University, told BE, “India is lacking a defined and prudent foreign policy for Nepal. After the support received from China for railway connectivity and OBOR projects, Nepal would never support India fully, going beyond China’s interests. As far as the illegal crossing and increasing number of Chinese schools in Nepal is concerned, India should be more cautious.”

Chinese intensions

Xi’s visit to Nepal was organised after his two-day informal visit to India. Around the same time, Pakistani Prime Minister Imran Khan visited China for a formal meeting with the Chinese government. With these three parallel summits, China has made it clear that they will maintain an open approach for considering bilateral deals and agreements.

Nepal shares a long border with India and has been dependent on India regarding trade. The recent political change in Nepal can be associated with a greater assertion for self-dependency. The Chinese investors have tapped into this and flushed the Nepalese economy with funds.

On the other hand, five Indian states share their border with Nepal, exporting items ranging from petroleum products, mechanical parts, cement, rice, medicine and agricultural and electrical equipment. With increased connectivity with China through road linkages, Indo-Nepal trade may take a back seat as the Nepalese market may tilt in favour of Chinese products. Many regional experts have opined that the current trade war with the US is forcing the Chinese to look for smaller markets such as Nepal proactively. However, according to Lahiri, “Trade for China is important, but the country is not taking all the initiatives only to increase trade. The country has already started to dominate the market in Nepal. If China wants to export more to Nepal, international trade between India and Nepal will automatically decrease.” The Chinese interest in Nepal seems to be more than economic. It can be linked to its ambition to be the dominant power in the South-East Asian region and India should take this challenge seriously.