Nepal’s Turn to China: Opportunities and Challenges

In this edition of Sambandh Scholars Speak, Antara Ghosal Singh interviews Amish Raj Mulmi on his book, All Roads Lead North: Nepal’s Turn to China (Context, 2021).

Breaking away from the ‘India-first perspective’ and refuting various western dogmas regarding China, the book provides a rare Nepali perspective on the history of human connectivity in the Himalayas and South Asia. It provides valuable insights into how Nepal’s northern neighbour has affected the lives of ordinary Nepalese since the 1950s and how Nepal’s view of China has evolved with time.

The book is many things at the same time. It is history; it is an interesting collection of rare personal accounts and anecdotes of people in the Himalayas; it has shades of journalistic reportage; and it has geopolitics—particularly the competition between China and India in South Asia, the evolving role of the United States in the subcontinent, and most importantly, the agency exercised by smaller South Asian nations like Nepal.

In the book, Amish demonstrates how prosperity has started percolating through Nepal’s northern border due to increased Chinese engagements, but with riders. He surveys Nepal’s growing closeness with China on the one hand and the various insecurities in the relationship on the other, including concerns over the prevailing power asymmetry, apprehensions regarding debt traps, and frustration over a slower pace of cooperation than what Nepal desires.

However, notwithstanding such concerns, Amish argues that China remains Nepal’s ultimate ray of hope to bring radical economic transformation and eventually extricate Nepal from India’s economic hold. Amish says that thanks to China, Nepal is now dreaming of better infrastructure, more trade and improved standard of living. He, therefore, infers that all roads for Nepal now lead north, and going forward it will be Nepal’s task to ensure a smooth ride.

Perceptive and refreshing, this book is an important read to understand how India’s neighbouring nations approach China and perceive its presence in the subcontinent, which is in sharp contrast to India’s own outlook and experience of China.

Antara Ghosal Singh: One of the key highlights of the book is the extensive fieldwork that you conducted in some of the remotest parts in the Himalayas along the China-Nepal border, tracking the movement and exchange of people, goods, and ideas in the region. How similar/dissimilar are the dynamics at the Nepal-China border and the Nepal-India border?

Amish Raj Mulmi: As my research along the Nepal-India border is limited, let me break down the answer in two parts.

Similarities: The Nepali borderlands on both the north and the south are witness to a historical process of marginalization by the ruling hill elite. The demographics of both the border areas are also similar in that in both regions, dominant ethnicities share familial and socio-cultural ties with populations across the border, despite restrictions on the northern border.
Dissimilarities: Apart from the radically different geography (Himalaya vs Indo-Gangetic Plains for the most part), the Nepal-India border has always been historically more open to migration, cultural interactions, and cross-border commerce and trade (perhaps the terrain itself is one of the reasons how cross-border interactions have been shaped). Beyond China’s unilateral determinants on the northern border that led to the securitisation of the Himalaya and restrictions on movement across borders, including on traditional practices of transhumant pastoralism, the northern border is also witnessing infrastructural upgrade      in many parts for the first time in their history, often in an attempt to connect better to China. One recent example is the road-building effort in northern Gorkha region, which will connect the Samagaun region to Tibet.

Tibetan exiles will find it extremely difficult to hold any sort of political events in Nepal from hereon.

AGS: Your book deals at length with the issue of Tibetan refugees in Nepal in the context of deepening ties between China and Nepal. How have closer relations between Nepal and China impacted the free flow and movement of Tibetans across the Himalayas and what does the future hold for them?

ARM: The movement of Tibetan exiles into Nepal has been heavily restricted post 2008, when anti-Beijing Olympics protests were held in Nepal. While there are no exact figures, we can get a sense from some numbers: Until 2008, almost 2,200 refugees crossed over into Nepal annually; in 2013, only 171 did. Similarly, in 2015, only 85 refugees applied for an exit permit to India, less than a tenth of the 1,248 who applied in 2010. While Nepali officials often correlate the drop in numbers to rising economic opportunities in Tibet and the ‘declining fervour of the Dalai Lama’, stringent border control measures by both sides – with China aiding Nepali security agencies in kind – have made it more difficult for Tibetans to cross over.

The new Nepal-China agreements over border management and mutual legal assistance practices have raised new fears about further controls over political and cuural expression within the residing Tibetan exile community in Nepal. The deportation of a Tibetan-American in June 2019 also raises new questions about whether Nepal is willing to deport foreign citizens on China’s request. Similarly, if the US decides to refocus on the Tibet question post the new Tibet Policy Support Act, which also assigns funds to Tibetan communities in Nepal, Tibetan exiles may find themselves caught in the global contest between Washington and Beijing. What is certain is that Tibetan exiles will find it extremely difficult to hold any sort of political events in Nepal from hereon.

Nepal’s China dilemma lies in exploring the relationship beyond the current government-to-government ties it is founded on, as well as in expanding its own state control in the Himalayan borderlands, where China has actively started dealing with local authorities to disburse aid.

AGS: In the book, you mention how on the one hand, Nepal longs for the ‘gift of development’ like in nearby Tibet and hopes for prosperity to percolate through its northern borders, but on the other hand, there are various insecurities in Nepal over its asymmetric relationship with China, where mostly Chinese interests and concerns prevail, with Nepal having very little say or bargaining power. Can we call this Nepal’s China dilemma?

ARM: As with any small country-big country dynamic, the Nepal-China relationship is also asymmetric. Nepal’s China dilemma lies in exploring the relationship beyond the current government-to-government ties it is founded on, as well as in expanding its own state control in the Himalayan borderlands, where China has actively started dealing with local authorities to disburse aid. But there is also a dissonance in how the relationship has been shaped by political ties, best seen in Nepal’s official rejection of China’s alleged border encroachment in Humla in September 2020 even before a field inspection had been carried out. Further, Nepal’s limited bargaining power with China continues to be highlighted by repeated closure of the border points at Rasuwagadhi and Tatopani post the Covid-19 pandemic.

Rasuwagadhi border, Nepal. Credit: Amish Mulmi

AGS: You have written about how the BRI in Nepal has been making comparatively slower progress than expected, with no large-scale investment flowing in, except for some small, opaque investments restricted to sectors such as tourism. You refer to a conversation between Nepal’s energy minister and the Chinese ambassador, where the former raised this pressing issue (p. 187).  Why is it that despite the hype over China-Nepal camaraderie, China does not make large scale investments in Nepal?

ARM: There are two sides to the story of large Chinese investments in Nepal. The first is Nepal’s own limited capacity to negotiate and execute large deals, which are often beset by political delays and dilemmas. This is best seen in the cancellation of the two mega-hydropower projects of Budhi Gandaki and West Seti, wherein the contracts for both were awarded to Chinese companies, but were eventually cancelled. Further, Nepali economic planners have not been very open to foreign investment either; the minimum threshold for foreign investment in all sectors is NRs. 50 million, which is not practical for all sectors.

The other factor is to enquire about China’s economic ambitions in Nepal—how it views the Nepali market, and whether large-scale investments have the potential to give returns or not. While a few G2G deals, such as the Pokhara international airport, a USD 215 million project that is being funded by a soft loan from the China EXIM Bank and is being built by China CAMC Engineering, are underway, the Chinese private sector has been seen to invest in sectors where returns are possible. One example is the Hongshi-Shivam Cement joint venture between a Chinese and a Nepali company, which is predicated on a construction boom within Nepal; other cement companies have similarly upped production to meet rising demand. This has led to a drastic decline in Nepal’s cement imports.

However, if exports to India’s populous northern market is the goal, India-China bilateral ties play an equal role in determining any investments. For instance, India’s new power import policy says it will not import power from projects that have investments from a third country that borders India, which many have interpreted as targeting Chinese investments in hydropower projects. Similarly, the much-vaunted Tibet-Kathmandu railway is also predicated on getting access to Indian markets, as suggested by a former Chinese ambassador to Nepal, who wrote, ‘It would be insufficient if only China and Nepal can benefit from the China-Nepal railway. It would be best if the railway can connect to India’s railway network. This way, Nepal can become the transit point between the Chinese mainland and the Indian subcontinent.’ [translation mine]

AGS: You write about the various expectations that Nepal has from its relationship with China (p.217-218) like rapid economic transformation, capability to rise up to India etc., but also wonder if these match with the Chinese expectations from its relations with Nepal. Is there an expectation mismatch between China and Nepal?

ARM: There is indeed a mismatch in expectations on both sides. For the most part since 2008, China has articulated its goals well in Nepal – even if they haven’t been pronounced publicly. It has engaged the Nepali establishment to restrict Tibetan activities and reduce cross-border movement widely; it has been more publicly visible than in previous years, aligning with its goal of becoming a global power as well as increasing people-to-people contact in its neighbourhood; it has been successful in getting Nepal to align with its views on Tibet, Hong Kong, Xinjiang and the Covid-19 pandemic; and its influence is now visible in regular people’s lives too beyond just the corridors of power, through the rise in Chinese tourists, increasing number of Nepalis studying in China, and with highly visible aid projects such as the Kathmandu Ring Road expansion project.

Nepal’s bilateral ties, not just with the two neighbours but with other nations as well, have hinged on the political leadership’s decision-making skills, which have often fallen short.

But Nepal’s expectations that China would enable (and also fund for the large part) its own infrastructural growth and development projects have been hindered by its own capacity deficits, and the inability to negotiate deals beyond those motivated by political decisions. Nepal’s bilateral ties, not just with the two neighbours but with other nations as well, have hinged on the political leadership’s decision-making skills, which have often fallen short. A recent example has been the failure in procuring Covid-19 vaccines – Kathmandu has not been able to convince Delhi about resuming Covishield exports, despite paying upfront for them; the acquisition process for the Sinopharm vaccines have been mired in difficulties arising out of Nepal’s own procurement rules, and there are reports that Nepal has signed a deal for 4 million doses after signing a non-disclosure agreement about the price. Although China recently stepped in with an additional grant of 1 million doses (in addition to the 800,000 gifted earlier), Nepal is struggling to procure more vaccines from any other country.

Here, the key question is how the Nepali political leadership has come to understand foreign policy goals and ambitions. One instance of how it does so is in the recent change in regulations for appointing ambassadors, who no longer have to be graduates. Further, of the 11 recent ambassadorial appointees, only two were career diplomats, while the rest were political appointees. For example, a retired schoolteacher with familial ties to the prime minister’s foreign relations advisor has been appointed as ambassador to Denmark; in her own words, diplomacy is a ‘new field’ for her.

AGS: Regarding China’s desperate attempts to prevent a split in the NCP [Nepal Communist Party] in the past months, you write, “Nepal’s politics and its politicians are a quagmire. Its leaders play each other and its neighbours constantly in the struggle for power. India had long waded into the puddle, played the game and lost. Now it’s China’s turn,” (pg. 213). How similar or dissimilar are China and India in terms of engagement with Nepal’s internal politics?

ARM: China, till the fall of monarchy, had limited engagements in Nepal, viewing the palace as a permanent establishment in the country. It was after the republic that China began to engage with parliamentary parties, including the Maoists, but only when the latter came above ground (here, one must recall China had not been too pleased with the Maoists during the civil war, calling them ‘bandits’ who besmirched Mao’s name).

India, on the other hand, has engaged widely with Nepali parliamentary parties as well as other arms of the establishment such as the Army since 1950, when a revolution overthrew the autocratic Rana dynasty. India’s perceived support to the Nepali Congress during the latter’s armed insurrection against the monarchy was one of the reasons why the monarchy remained wary of Indian interests in the country. Post-1990, and especially after the 2006 agreement that brought the Maoists to the political mainstream, India’s role in Nepali politics has been continuously affirmed.

India has been familiar with the cacophony of domestic politics in the country, and played its cards well by keeping in mind its interests and engaged with Oli, who has been one of the primary drivers of anti-Indian nationalism in Nepal.

In recent times, however, both India and China have faced setbacks in Nepal – India in 2015, and China in 2020. The 2015 ‘unofficial’ blockade made Delhi extremely unpopular in the country, and together with India’s previous history of supporting an anti-Maoist coalition and what Kathmandu perceived as Delhi’s interference in its constitution-making process, forced the Kathmandu establishment to look towards China to break away from India’s economic monopoly over Nepal.

China, similarly, faced a setback after the split in the NCP despite tremendous investments such as the 2019 state visit by Xi Jinping, establishing fraternal ties between CCP and NCP, and NCP cadre being trained in Xi Jinping Thought. China had perhaps invested all its eggs in the NCP basket, believing Nepali Communists to be the primary political force in the country. However, India picked up the pieces and engaged with Prime Minister (former) K.P. Oli at a time when he was isolated within his party and despite the 2020 Kalapani controversy. [Editor’s note: On July 12, 2021, Nepal’s Supreme Court ruled that President Bindya Devi Bhandari’s decision to dissolve the House of Representatives on K.P.Oli’s recommendation was unlawful and installed Sher Bahadur Duba as the new Prime Minister of Nepal.]

Here, one could suggest that China still had to come to terms with the vagaries of democratic politics, especially in countries like Nepal where no single political force commands widespread support. On the other hand, India has been familiar with the cacophony of domestic politics in the country, and played its cards well by keeping in mind its interests and engaged with Oli, who has been one of the primary drivers of anti-Indian nationalism in Nepal.

About the Expert:

Amish Raj Mulmi’s writings have been published in The Himalayan Arc: Journeys East of South East (HarperCollins India, 2018) and Best Asian Speculative Fiction (Kitaab, 2018). He has written for, among others, Al Jazeera, Roads and Kingdoms, Himal Southasia, India Today, The Kathmandu Post and The Record. He is a consulting editor at Writer’s Side Literary Agency, and has previously worked for Juggernaut Books and Hachette India. He is from Pokhara. This is his first book.

Header image: China customs station under construction. Credit: Amish Mulmi.