As the level of engagement between the two countries increases, the currently stable Nepal-China relations are likely to more and more resemble the topsy-turvy Nepal-India ties. Right now, the communist government in Kathmandu seems commit­ted to closer cooperation with Beijing, come what may. Pursued wisely, this policy of engagement with the Middle Kingdom could pay off. China seems committed to closer ties following the long-awaited Nepal visit by Xi Jinping last October. “The visit by a Chinese president after 23 years has helped scale up trust at the top political level, which in turn has had a pos­itive impact on other bilateral issues,” says Rupak Sapkota, deputy executive director of the Institute of Foreign Affairs, a govern­ment think-tank. The spreading coronavirus contagion in China could dent cooperation a bit, particularly in tourism. Nepal will now struggle to meet its goal of bringing 500,000 Chinese tourists in 2020. Otherwise, accord­ing to Sapkota, China has already assured of “special arrangements to offset the effects of coronavirus in projects, tourism, and other areas.”

 

The Chinese seem keen on improving the condition of the two roads linking the two countries: Araniko Highway and Kathman­du-Rasuwagadhi Highway as they believe that the much-touted rail-link could take some time to materialize, given the difficult terrains it has to pass through. If the two major road links can be turned to all-season routes, as China wants, bilateral trade could see a big boost.

 

Says Mrigendra Bahadur Karki, executive director of the Center for Nepal and Asian Studies, China has been in ‘action-mode’ in Nepal following Xi’s visit.

 

Headway in Chinese projects following Xi' s Nepal Visit 

 

Chinese President XI Jinping’s Nepal visit last October seems to have served as a catalyst to push forward several impending bilateral issues and projects. Apart from the agreements and under­standings signed, the visit helped resolve other pending issues as well.Xi was the first Chinese president to visit Nepal after a 23-year hiatus. During his visit, the two countries signed 20 agreements and under­standings. Before that, Nepali Pres­ident Bidya Devi Bhandari had vis­ited China in April 2019 to take part in the second Belt and Road Forum where she held high-level meetings and signed some agreements.

 

“The visit by a Chinese president after 23 years has helped scale up trust at the top political level, which in turn has had a positive impact on other bilateral issues,” says Rupak Sapkota, deputy executive director of the Institute of Foreign Affairs, a government think-tank. He adds that an environment of trust is already seen in multiple sectors.

 

Agreements are being imple­mented at a faster clip, although the coronavirus outbreak has affected them somewhat. “But as far as I know, the Chinese side has already assured Nepal that it would make special arrangements to offset the effects of coronavirus in projects, tourism, and other areas,” Sapkota says. After Xi’s visit, around two dozen Chinese delegations have come on follow-up visits to Nepal.

 

“At present, China and Nepal are stepping up efforts to implement the important agreements made by the leaders; some projects have already made progress,” said Chi­nese Ambassador to Nepal Hou Yanqi during a recent press meet.

 

Of late, the cross-border railway has been a hot topic of discussion. But due to the difficult terrains, the railway line will command tre­mendous resources, time, and cut­ting-edge technology. Regardless, the two sides are making progress on the rail line. After pre-feasibility, they have agreed to a three-phase feasibility study. In recent meet­ings, officials have agreed on what each side needs to do. Talks are also underway for the Kathamn­du-Pokhara-Lumbini railway lines.

 

Roads over rails

As the railway is still under study, it may take some time yet. At the moment, construction of new roads and upgrade of old ones remain a priority. There has already been some progress in upgrading two major roads connecting Nepal and China: Araniko Highway and Kath­mandu-Rasuwagadhi Highway.

 

The Chinese side is helping the Department of Roads in the third phase of maintenance of Aranika Highway, which was damaged by the 2015 earthquakes. There has also been an agreement to expand and blacktop Syaphrubesi-Rasuwagadhi section of the Kathmandu-Rasu­wagadi Highway. Yet with the Nepali side is yet to demolish roadside structures and remove electricity poles, there have also been delays. Once this phase is done, the road expansion will start in earnest.

 

If these two major highways come into operation in all seasons, they are expected to greatly boost bilat­eral trade. Due to the difficult ter­rains, the two sides have also agreed to build two tunnels along the high­ways to ease connectivity. An agree­ment to this effect was signed during Xi’s visit. “To facilitate the railway project, the process of building tun­nels has moved forward,” Prime Minister KP Oli said while address­ing the parliament on February 15. A team of Chinese technical officials is already in Nepal to study the tun­nels’ feasibility.

 

Mrigendra Bahadur Karki, execu­tive director of the Center for Nepal and Asian Studies, says that after Xi’s visit, China has been in action-mode in Nepal, which means all agreements signed during the visit will progress swiftly. “Xi came after the formation of a stable govern­ment in Nepal. It indicates China was in favor of a stable government so that projects could be imple­mented,” Karki says. “Obviously, China has become more proactive in Nepal, and this level of activity is only expected to rise.”

Delivering diversification

 

There has also been progress in the implementation of the Transit and Transport Agreement signed in 2016 as well. The follow-up proto­col implementation agreement was signed during President Bidya Devi Bhandari’s Beijing visit last year. The protocol came into effect on 1 January 2020. As per the agreement, Nepal is allowed the use of four Chi­nese ports for third-country trade and transit, in what is considered a major progress in changing Nepal’s land-locked status. It is a part of Nepal’s broader foreign policy of diversifying its trade and transit facilities.

 

There has also been a joint feasi­bility study for bilateral free trade agreement. China has been urging Nepal to sign the agreement at the earliest, but Nepal insists it needs more homework. The two countries are also in the process of choosing a location for China-Nepal Cross-bor­der Economic Cooperation Zone, and officials have already held a few rounds of talks in this regard.

 

Similarly, the two countries have agreed to hand over each other’s cit­izens who illegally cross the border, as a part of an agreement reached during XI’s visit on the boundary management system. Both the coun­tries are working to implement the agreement, even with concerns that such provisions could be misused to forcefully repatriate Tibetan ref­ugees.

 

Bilateral trade is also booming even though trade imbalance with China remains a concern. But things may be improving for Nepal. Accord­ing to data provided by the Chinese Embassy in Kathmandu, “In the first 10 months of 2019, the trade volume between China and Nepal reached US $1.2 billion, an increase of 36.1 percent year-on-year, of which Nepal’s export to China increased by 58.1 percent.”

 

There is also increased collabo­ration in tourism. With Xi’s visit, the number of Chinese tourists is expected to rise, notwithstand­ing the effects of the coronavirus epidemic. Chinese investment is increasing every year; it is already the largest investor in recent years. In fiscal 2018/19, China's investment in Nepal was US $114 million.

 

Progress amid uncertainty

Despite progress in other areas, the finalization of projects under the Belt and Road Initiative (BRI) is still being hindered. The two countries are yet to select BRI projects mainly due to differences over investment modality. Sapkota of the govern­ment think-tank blames the bureau­cracy’s tardiness for the slow prog­ress. “It is the responsibility of the taskforce formed under our foreign secretary to finalize technical details and present them to political leaders who can then settle other issues,” Sapkota says. Nepal had signed the BRI framework agreement in May 2017, and the government had ini­tially identified three dozen projects under it, which has now been cut to nine.

 

Ajaya Bhadra Khanal, research director at the Center for Social Inclusion and Federalism, says that China has adopted a policy of slowly but steadily expanding bilateral rela­tions after Xi’s visit. “Infrastruc­ture projects are in the preparatory stage, so there is not much visible progress. China has given priority to areas such as cultural relations, stra­tegic community and people-to-peo­ple ties,” adds Khanal, who has been involved in an in-depth research of Chinese engagement in Nepal in the recent past. “Enhancing political relationships is another priority area for China. China is developing ties not only inside the ruling Nepal Communist Party but also with the main opposition Nepali Congress and other parties.”

 

Even though there may in the future be many upheavals in Nepal-China ties, it is hard to see the increased level of engagement between them decrease