The ‘rhetoric’ about Nepal becoming ‘a vibrant bridge between China and India’ has been around since it became a republic. Former prime minister Pushpa Kamal Dahal had floated the idea of ‘trilateral cooperation’ between China, India and Nepal during his Beijing visit in 2009. Recently, China proposed building a China-India-Nepal Economic Corridor (CIN-EC) as part of its larger goal of implementing infrastructure development in the region. Chinese Foreign Minister Wang Yi had proposed this idea during his visit to Nepal to attend the International Conference on Nepal’s Reconstruction (ICNR) last year. 

Against this backdrop, China and Nepal signed an Agreement on Transit Transport during Prime Minister KP Oli’s visit to Beijing in March. However, China has not yet clearly laid out how it would like to go about cementing the relationship with Nepal. These developments have made India anxious, and it is waiting to see how far China will go to realise all these ‘beginnings’. 

Nepal’s priorities

Before speculating about where China and India stand, Nepal should identify what its priorities are in the long term. Its economic development largely depends on how much it can invest in the productive sector and how far it can fill the infrastructure gap. As investment flows are significantly low, young people have been leaving the country in epic numbers to work in the Gulf and Malaysia. Development activities that were anticipated to take off with the promulgation of the new constitution have not happened. Manufacturing and services have been performing below par even though the Indian blockade ended months ago. Tourism is the only sector that has been showing signs of a rebound, but it will be difficult to sustain the growth with a political crisis looming.

In order to revive the moribund economy, Nepal needs to come out of the current political instability and embark on the road of economic development. This is where China has space in Nepal, only one space: Nepal’s economic development. The country needs an exogenous shot in the arm. The development of transportation, health, education and hydropower will not be possible without a massive boost in foreign direct investment (FDI) from both China and India. 

Game of politics

Nepal has been seeing fast-paced political developments, especially after the promulgation of the new constitution, with India’s heavy-handed actions and China’s subtle participation. Since then China is said to be working to counter India’s political hegemony in Nepal, but there can be a counter-argument to such a claim, given the Communist Party of China’s very lengthy decision making process. 

In any case, China should not be engaged in petty political games if it wants to win the hearts of the Nepali people who have been suffering from a vicious cycle of poverty and underdevelopment. China should be playing a fair game of supporting Nepal to develop its infrastructure and push the country towards the path of economic prosperity. 

China should realise that playing a ground-level game as India has been doing in Nepal by being provocatively engaged in domestic affairs will backfire in the long run. A case can be made for a prosperous Nepal, which can stand up stronger against India and other international forces which want to exercise influence inside China through Nepal. 

Moreover, let us observe India’s actions after Nepal promulgated the constitution. Indian Prime Minister Narendra Modi went to Brussels and London from where he could include the issue of Nepal in a joint communiqué urging Nepal to correct its course. This clearly indicates India benefits from the support of Western forces given the values they share. 

That is the not the case with China. Having alliances and powerful friends is much more important for long-term dominance in world politics. China’s peripheral diplomacy is the result of such a realisation, but it has to be cautious when it comes to Nepal. It should be careful that its engagement in Nepal will remain confined to economic ties. 

Economics, economics, economics

Thus, the only space left for China in Nepal and the larger South Asia is to be active on the economic front. Chinese investments can easily be a key to trigger growth in Nepal, create jobs as well as push us towards having an interdependent economy with India. If China helps Nepal to produce electricity regardless of whether India buys it or not, Nepal can host manufacturing industries by providing heavily subsidised power. In that scenario, Indians from the northern part will cross the border into Nepal for better jobs, making India dependent on remittances from Nepal. 

This is just one example of how China can counterbalance India in Nepal. But for that, China should think long term, and Nepal needs to reciprocate. 

Poudel is an economist associated with ThinkIN China, Beijing