The Federal Democratic Republic of Nepal is a relatively small Asian state with a population of 30 million. The landlocked country has borders only with India and China. Historical and cultural ties with India have led New Delhi to be Kathmandu’s most important foreign policy partner today. However, in order to minimize the risk of becoming a satellite state of India, Nepal’s leadership is seeking cooperation with Beijing, which in the last decade has been striving to assume a dominant position on the Asian continent and include more and more countries in its sphere of influence.
From September 12 to 15, 2022, Chairman of the Standing Committee of the National People’s Congress (NPC) Li Zhanshu paid an official visit to Nepal at the invitation of Speaker of Nepal’s House of Representatives Agni Sapkota. During his stay in the country, the Chinese official met with Nepalese President Bidhya Devi Bhandari and Prime Minister Sher Bahadur Deuba.
Li Zhanshu’s talks with Nepal’s top officials took a warm, friendly tone. The Chinese public official recalled Chinese President Xi Jinping’s official visit to Nepal in 2019, which significantly raised the level of relations between the two countries and paved the way for the development of international dialog in the coming decades. Li Zhanshu expressed sincere gratitude to Kathmandu on behalf of his state for supporting China in matters related to Tibet, Taiwan, and human rights in Xinjiang. The NPC Committee Chairman also said that Nepal is one of the top priorities of Chinese diplomacy. Li Zhanshu asserted that China is willing to reach agreements with the Nepalese leadership to expand cooperation between the two countries.
For her part, Nepalese President B.D. Bhandari positively assessed Xi Jinping’s first visit in the history of China-Nepal relations, calling it crucial for the development of mutual contact. She also stressed that Chinese authorities had made a gesture of goodwill by providing all possible assistance to Nepal in the aftermath of natural disasters, which are quite common in this small Asian country, and by supporting the fight against coronavirus infection in 2020-2021. Bhandari described China as one of the fastest-growing nations in the world, a positive example for other countries to follow. The Nepalese president noted that continued cooperation between Kathmandu and Beijing would noticeably accelerate the growth of Nepal’s prosperity and bring the implementation of many government programs closer.
In 2017, Nepal representatives signed an agreement with China to participate in China’s Belt and Road infrastructure project, which aims to make Nepal one of the key transportation and logistics hubs for Asian trade.
Despite welcome rhetoric toward China, Nepal continues to maintain close economic ties with India. Nepal’s geographic location contributes to the development of relations between New Delhi and Kathmandu. This is because the rich Chinese provinces, where most manufacturing is concentrated, are located mainly in the eastern part of the PRC, while the southwestern provinces of China that border Nepal are mostly poor and sparsely populated. In addition, overland trade between Nepal and China is complicated by the Himalayan Mountains that run between the two countries, greatly complicating logistics and resulting in high transportation costs. At the same time, the Indian states are quite evenly developed and populated, and geographically Nepal and India have no barriers between them and this contributes to a successful trade.
India is Nepal’s largest foreign trade partner, accounting for more than half of all Nepalese exports and imports. Nepal supplies India mainly with agricultural products and light industrial goods. India exports machinery, machine tools, and petroleum products to Nepal. However, China’s share of Nepal’s economy is growing year by year. This being said, it is unlikely that China will be able to surpass India in the near future, as the Celestial Empire has not yet created the right infrastructure to expand trade contacts with Nepal.
One of the factors straining India-Nepal relations is the territorial dispute between Nepal and India over the Lipulekh, Limpiyadhura, and Kaalapani regions. The Indian authorities consider these areas to be an integral part of their country, while Nepal issues maps stating that these territories belong to it. This conflict results from the wrong decisions made by the British colonial authorities in drawing the borders during the granting of independence to Nepal in 1923.
A negative role in the relations between Kathmandu and New Delhi is also played by the unstable situation of ethnic Indians living in the border areas of Nepal, who make up about 30% of the country’s population. Most of them are dissatisfied with their political and socioeconomic status and are in favor of granting additional rights and freedoms.
In 2015, Nepal was overwhelmed by mass protests against the adoption of a new constitution that abolished Hinduism’s status as the state religion. About 80% of the country’s population professes Hinduism, and it is ethnic Indians who are most zealous about religion. In the cities where they live, there were mass riots that often ended in bloodshed. In addition, ethnic Indians were angered by changes in the powers of regional chiefs that did not favor ethnic minorities.
India has a policy of helping its compatriots living in other countries, and for this reason, the Indian authorities always show their reaction to the violation of the rights of Nepalese Indians. However, so far, the Indian leadership has only made loud and sharp statements condemning Nepal’s actions against ethnic Indians.
Many ethnic Indians living in Nepal have relatives in India. Increasing the distance between Kathmandu and New Delhi could disrupt relations between the communities, which are often based on economic trade interests, and lead to increased unrest among the Indian ethnic community in Nepal. The country’s authorities are aware of this and are therefore pursuing a multisectoral policy.
However, the situation at present makes it unlikely for China to succeed in including Nepal in its sphere of influence, as Kathmandu has a very strong connection with New Delhi. The most probable scenario would be for Nepal to balance China and India. The Nepalese leadership will continue to maneuver between the two major regional powers and benefit from the desire of the Chinese and Indian authorities to bring Nepal under their control. Nepal, as a poor country, will benefit because it will receive investment from both regional giants who will try by all means to get Kathmandu on their respective side by offering increasingly favorable terms for cooperation.
Petr Konovalov, a political observer, exclusively for the online magazine “New Eastern Outlook.”