Last week, Nepal inked a deal on the One Belt One Road (OBOR) Initiative. This makes Nepal an official partner to Beijing’s ambitious plans to revive the ancient Silk Road trade routes. As China embarks on a path to rejuvenation, the OBOR framework agreement also marks a major step for Nepal in strengthening its ties with China, the world’s second largest economy. Professor Hu Shisheng, Director of the Beijing-based Institute of South and Southeast Asian and Oceanian Studies at China Institutes of Contemporary International Relations, is a much sought after expert on Nepal-China ties. In an email interview with Sanjeev Giri, Hu highlighted the importance of policy coordination, connectivity, free trade, financial integration and people-to-people contact between Nepal and China. He also addressed the issue of ‘Indian reluctance’ to join the OBOR, stating that the Indian apprehension is unnecessary. 

How significant is the fact that Nepal has joined the OBOR Initiative?

It is significant. The significance is demonstrated in many ways: the bilateral efforts to promote cooperation in relation to connectivity issues and industrial capacity building will be put on a well-guided and undisturbed track. Though the Memorandum of Understanding (MoU) isn’t legally binding, it can still play a big role in preventing any major party from disrupting the economic and social cooperation between Nepal and China. It will raise the confidence of the Nepali people in carrying forward post-earthquake reconstruction. It will enable the Nepali government and its people to realise the long awaited dream of transforming a landlocked Nepal into a land-linked Nepal. 

What specific benefits will Nepal derive from being an OBOR partner?

For one, it will be easier to provide financial support for construction of infrastructure projects in Nepal through OBOR institutions, such as the Asian Infrastructure Investment Bank (AIIB), the Silk Road Foundation and Chinese banks. Additionally, the MoU has greatly enhanced Chinese confidence in Nepali investments, so more Chinese companies from both the public and private sectors will now be keen to invest in Nepal. As infrastructure improves in Nepal, it will lead to other developments. For example, Nepal’s accommodation services will get better, attracting more Chinese tourists for pilgrimages or for trekking and climbing the snow-crested peaks. Perhaps some Chinese industries, such as the tourism oriented service industries, will also be shifted to Nepal. On top of all this, the railway link between China and Nepal is in the works as well. 

As you see it from Beijing, what could prevent Nepal from making the most of these potential gains?

The largest hurdle that stands in the way of implementing the MoU between the two governments is the internal political instability in Nepal. Additionally, Nepal’s southern neighbour could cite certain security issues as an excuse to derail the OBOR projects. The ongoing problems with the Madhesi groups in southern Nepal could also prove to be a potential roadblock for Nepal to take full advantage of the OBOR. The major priority is to bring the current constitutional process—which has been in the works for about 10 years—to a successful and satisfactory conclusion. The implementation of the MoU is not as important as the successful implementation of the constitutional process. 

With the OBOR framework now in place, what concrete developments do you see? How long will it take to see projects on the ground? 

Both sides have to establish a joint committee or joint institution to match their respective development agenda. The post-earthquake reconstruction process will be given particular attention. Projects related to reconstruction efforts will be the ‘early harvests’ of this partnership. However, such progress cannot be made if the political and administrative restructuring in line with the new constitution is not accomplished in time. 

How does China view the ongoing political developments in Nepal, particularly the holding of the local level elections?

China would like to see peaceful and successful local elections. China would also like to see a smooth political and administrative transformation that is in line with the new constitution. This progress would eventually put an end to the protracted political instability, which has hindered development in Nepal for many years. Nepal missed out on the chance to benefit from the surge of economic globalisation that was driven by the US-led Western order following the end of the Cold War. It would be a shame if Nepal also missed the upcoming new round of economic globalisation driven by China with its OBOR Initiative. There is a saying in China, “After this village, there is no such shop.” This means it is now or never. 

What can Nepal do to foster closer ties with China?

Major parties must forge a consensus with an agreement to implement the MoU as soon as possible. Feasibility studies for a Free Trade Agreement (FTA) and railway linkages must also be facilitated to prepare for these two critical developments that will cement ties between Nepal and China. Additionally, the new constitution must be successfully implemented. 

India isn’t part of the OBOR and has resisted the China-led initiative. In this context, how can Nepal emerge as a gateway for South Asia as described by the Chinese?  

If Nepal is transformed from a landlocked country into a land-linked one, Nepal could serve as a gateway and provide China and other South Asian countries a way to interact. The Himalayan range would cease to be a natural barrier prohibiting trade and travel. Nepal’s prosperity through the OBOR would eventually entice the people of India to participate in the initiative as well. However, initially it is advisable that China and Nepal undertake bilateral projects, and then move on to trilateral projects. Old habits die hard and India will not be easily convinced to join the OBOR.

Does India have reasons to be apprehensive about Nepal’s growing proximity to China?

India should not have any apprehensions about Nepal’s proximity to China. Such proximity is purely for the economic benefit of the people of the two countries. The OBOR projects even welcome India to participate; China would like to see the Sino-Nepal OBOR projects develop into trilateral projects, with India as the third party. India should also be confident in the fact that China’s influence and leverage in Nepal can never surpass India’s. China doesn’t believe that there is a zero-sum game in the case of Nepal. The Himalayan range could be turned from a natural barrier into a natural bridge for the entire region; this trend will benefit billions of people in this region and beyond. 

How can India’s apprehensions about China’s increasing inroads into South Asia be allayed?

Time will prove that such apprehensions are outdated. However, there are ways the Indian elites can be reassured. China and India could make high-level exchanges between top leaders regular. The two countries could also jointly carry forward development projects in this region. China will also continue to encourage India’s neighbouring countries to promote and maintain good relations with India. 

Does Nepal have reasons to fear a rising China?

Not at all. There has never been a major war between Nepal and China. The two countries have no historical liabilities, let alone sovereignty disputes. China also appreciates the fact that there has been no government in Nepal thus far that has supported the Dalai Lama and the issue of Tibet. The Chinese government will maintain a principle of non-interference for the foreseeable future, and will also maintain good relations with all major political parties in Nepal. 

How big a factor is the issue of Tibetan refugees in China’s policy towards Nepal?

It is a concern, but not that big an issue. Successive Chinese governments have appreciated the Nepali government’s policy towards Tibet. Tibetan refugees in Nepal live peacefully and have better earnings than ordinary Nepali citizens. However, the Chinese government will, at some point, have to negotiate their future with the Nepali government. 

Additionally, development benefits are shared equally in China, and the Tibetans in China are also profiting from this. Local Tibetans in China are increasingly satisfied with the central government’s Tibet policy. The Dalai Lama and his administrative body are now encountering a very cold wave—the strongest since the end of the Cold War. As a matter of fact, the Dalai Lama and his political followers have no 

bargaining chips left in dealing with the central government.