Politics, economy, people ties, culture — how China has slowly expanded its grip over Nepal

China’s interest in Nepal is over a decade old, but the watershed moment was the 2015 Madhesi agitation and blockade, which was viewed as being India-backed.

Nepal PM K.P. Sharma Oli (left, centre) and Chinese President Xi Jinping (right, centre) with their respective delegations at a 2019 meeting in Kathmandu | Photo: ANI

New Delhi: Nepal Prime Minister K.P. Sharma Oli has, in the past few weeks, brazenly and aggressively taken on India. From pushing ahead with amending a map that includes disputed territories with India, to claiming there is a ploy on in New Delhi to unseat him, Oli has been unabashed in his belligerence, which many in the power corridors of both the countries see as stemming from the confidence of having China’s backing.

Whether or not there is anything concrete to these murmurs, the story of China’s growing influence on Nepal is real and long, but in the last few years, this has become far more obvious, pervasive and overwhelming. From Nepal’s politics, to its economy, infrastructure, socio-cultural elements and people, Beijing has ensured its stamp on all key spheres.

While China’s interest in Nepal is around a decade old, the watershed moment was the Madhesi agitation and subsequent Nepal blockade of 2015, widely viewed as being backed by India. This blockade created a wave of resentment against New Delhi. Despite the ‘roti-beti ka rishta’ between the two countries, Nepal — mainly the hill regions and the elites of the Kathmandu valley — have viewed India with suspicion for what they see as its ‘big brother’ attitude. The blockade only accentuated that, and thus began Kathmandu’s far more steep and defined turn towards the other big neighbour — China.

The sudden 2016 demonetisation also irked Nepal, with India continuously delaying the exchange of demonetised currency — countries like Nepal ended up with large volumes of demonetised currency. The stand-off, in a sense, continues, with Nepal demanding that India take back demonetised currency worth Rs 7 crore from its central bank.

“Beijing wants to diminish age-old relations between Nepal and India and have a regime that is more sensitive to China’s interest and one that is able to resist Indian influence,” said Vijay Kant Karna, former diplomat and professor of political science at Kathmandu’s Tribhuvan University.

ThePrint reached Nepal’s Foreign Affairs Minister Pradeep Gyawali for comments, and he said he would be in a position to respond only in a few days. This report will be updated when he responds.

Influence on domestic politics

That Oli is close to China is hardly a secret, but under his regime, Beijing’s influence on Nepal’s internal politics has only been growing. This is also because Oli is himself cornered in the Nepal Communist Party, with Pushpa Kamal Dahal ‘Prachanda’, Madhav Kumar Nepal and Jhalanath Khanal out to oust him.

After Prachanda unseated Oli in 2016, China’s Global Times carried an opinion piece blaming the former, and stating how Kathmandu could “risk missing chance” with Beijing — indicating how the country viewed Nepal’s domestic politics.

Sources in the government say a significant amount of the influence in Nepal, meanwhile, is now being exerted through China’s ambassador to the country, Hou Yanqi.

According to highly placed sources in the ruling party, around early May, Hou held a meeting with these key leaders of the Nepal Communist Party, and convinced them to work together instead of fighting.

With this, Oli may have bought peace for a while. But at an intra-party meet Tuesday, he was cornered again. Sources privy to what happened in the closed-door meeting say Prachanda asked Oli to resign as both PM and chair of the party, and in a heated argument, said it wasn’t India but he who was asking for this.

Along with him, Khanal, Madhav Nepal and Bamdev Gautam also accused Oli of “deteriorating” equations with India and “degrading” the party position with his statements. Sources say given this backdrop, another meeting with Hou could be organised soon.

Experts in Nepal believe Oli’s confrontationist position with India could not have been possible without China’s active support.

“PM Oli is no longer afraid of annoying India. In between, he held consultations with the Chinese ambassador. PM Oli also defended China’s role in the Kalapani dispute. He, in fact, has held consultations with the Chinese ambassador several times,” Prof. Karna added.

Hou gave a detailed interview to Rising Nepal, published Tuesday, where she detailed the “long-standing” Nepal-China friendship.

What is also true is that India’s recent disposition towards Nepal hasn’t quite helped matters either — from what it views as India’s ‘unilateral’ opening of the link road to Kailash Mansarovar, to Army chief General M.M. Naravane’s comments that Nepal’s protests were perhaps at the behest of “someone else”.

“The recent, insensitive remarks by Indian Army chief caused a lot of disappointment to Nepal. Moreover, Nepal has been seeking a meeting with India over the border dispute since November — the last official request was in January — but New Delhi hasn’t responded. All of this together has made Kathmandu upset,” said Akhilesh Upadhyay, senior fellow at Kathmandu-based think-tank Institute for Integrated Development Studies, and former chief editor of Kathmandu Post.

“As for China, its influence is rising globally, so only natural it will increase in its own backyard. The new China does not see the old Himalayas as a barrier,” Upadhyay said.

Infrastructure & economic dependence

Domestic politics is one aspect, but how crucial Beijing has become to Nepal economically is as significant.

“In 2019, the trade volume between China and Nepal reached 1.5 billion dollars. Nearly 170,000 Chinese tourists came to visit Nepal in 2019, and China has become the second largest tourist source in Nepal,” Ambassador Hou said in the interview to Rising Nepal.

“According to the statistics of the Nepali side, China’s total aid to Nepal (including grant and loans) ranks first among bilateral development cooperation partners of Nepal. China’s grant amounted to 106 million dollars, ranking first among all multilateral and bilateral development cooperation partners of Nepal,” she said.

“Up to now, among the 25 China aided post-earthquake reconstruction projects, 12 projects including the first phase of Kathmandu Ring Road Improvement Project and Kathmandu Durbar High School Reconstruction Project have already finished, while other projects are progressing in a steady and organised manner,” Hou added.

With Chinese President Xi Jinping’s ambitious Belt and Road Initiative, the focus on Nepal is even stronger.

Experts also view this Beijing tilt as Nepal’s desire to hedge its bets and reduce economic dependence on India.

“Nepal’s turn to the north is as much a reaction to India’s micromanagement of Nepal’s domestic affairs during the transition years, which culminated in the 2015 blockade, as it is a desire to reduce economic dependence on India,” said Amish Mulmi, a columnist with the Kathmandu Post, who is writing a book on Nepal-China relations

“In China, it also sees a possibility to accelerate economic growth through infrastructure development,” Mulmi said.

Meanwhile, China is also involved with the Pokhara International Airport project — China CAMC Engineering is in charge of it, and Kathmandu inked a $215.96 million soft loan agreement with China EXIM Bank in March 2016 to fund the construction. Then, there are investments in the manufacturing and hydropower sectors — Hongshi-Shivam Cement Private Limited, a Nepal-China joint venture, is the Himalayan nation’s largest cement producer.

In October last year, Xi Jinping visited Nepal — the first visit by a Chinese president to the country in over two decades — and announced a slew of investments.

In financial year 2018-19, Nepal’s trade deficit with India reached Rs 85,519 crore, while that with China hit Rs 20,340 crore.

According to the website of the Indian embassy in Nepal: “India is Nepal’s largest trade partner and the largest source of foreign investments, besides providing transit for almost entire third country trade of Nepal. India accounts for over two-third of Nepal’s merchandise trade, about one-third of trade in services, one-third of foreign direct investments, almost 100 per cent of petroleum supplies, and a significant share of inward remittances on account of pensioners, professionals and workers working in India.”

People-to-people connect

What had for decades determined India-Nepal relations were the people-to-people connections and close ties between those on both sides of the porous border. This, however, has also become among Beijing’s key focus areas.

Sources in the Nepal government point towards China’s “soft-power diplomacy”, led actively by Hou. From making Mandarin compulsory in schools to Beijing offering a range of scholarships — multiple steps have been initiated. The Chinese embassy has also been organising regular cultural programmes.

“China has been organising various training programmes for government officials, bureaucrats, politicians etc. in Nepal. It is also true that this Chinese ambassador is far more visible and active than her predecessors,” said a Kathmandu-based political figure on the condition of anonymity

“Between China and Nepal now, there is people-to-people exchange, government-to-government exchange, civil society-to-civil society exchange and military-to-military exchange as well,” the figure said.

In 2019-20, the scholarships and training programmes offered by China to Nepali civil servants increased exponentially — to more than 850 from just 20 in 2004.

China has also been assisting Nepal through video conferences on how to handle the Covid pandemic. The Nepal Communist Party held a virtual meet with the Chinese Communist Party last month.

The quid pro-quo

For China, increased engagements with Nepal have ensured a near-absence of exiled Tibetans’ political activity in the country. Due to various security agreements and exchanges, the flow of Tibetan refugees into the country has also reduced drastically.

Nepali immigration officials’ figures show a jarring drop from 1,248 Tibetans in 2010 to just 85 applications for an exit permit to India (with transit through Nepal) in 2015.

Control over Nepal’s affairs also helps Beijing reduce Indian and Western influence in the country.

“There is an increasing convergence between the current government’s nationalist, anti-Indian position and China’s ambitions to reduce Indian influence in South Asia,” Mulmi said.

This aligns with the ‘neighbourhood policy’ Xi laid out way back in 2013, when he said “the diplomatic work with neighbouring countries is out of the need to realise the two centenary goals and achieve the great rejuvenation of the Chinese nation”.

But Upadhyay has a piece of advice for India — don’t look at the short term when it comes to its relations with Nepal.

“India, as the Asian power, has to keep faith in a long game — especially in engaging with democracies, big and small. Democratic values should be a core component of its external engagement,” said the senior fellow at IIDS.