On February 28, the Cabinet passed a resolution stating Nepal would not allow the “use of its soil for activities against any friendly nations”. The decision was taken on the heels of a series of statements issued by China against the $500 million US development grant under the Millennium Corporation Challenge (MCC) compact. It was meant to assuage China that the compact’s passage would not undermine its security.
Growing American influence in China’s ‘backyard’ has sent Beijing into a tizzy.
Foreign policy experts say though China does not object so much to the compact itself. Beijing’s policy-makers rather think Western powers could use the grant to increase their influence in the Himalayan region. Multiple political and diplomatic sources confirmed to ApEx China’s worry over the prospect of ‘anti-Chinese activities’ on Nepali soil.
China is sending a high-level delegation to Kathmandu under Foreign Minister Wang Yi to take up Beijing’s concerns with the Nepali leaders. Traditionally, Beijing has sent such high-level teams following big political changes and developments in South Asia and Kathmandu.
Soon after the parliament’s dissolution in 2020, China had sent Guo Yezhou, Vice Minister of the International Department of the Communist Party of China, to take stock of Nepal’s political situation. Similarly, Wei Fenghe, Chinese State Councilor and Defense Minister, had visited Nepal on 29 November 2020 at the peak of India-China border standoff in Galwan valley.
Lately, new issues have also emerged in Nepal. The US and its allies in Kathmandu are turning up pressure on the Home Ministry to document Tibetan refugees and provide them with identity cards, a process that had stopped in 1994 following Chinese pressure.
US officials say Nepal should provide identity cards to Tibetan refugees to ensure their access to education, health and jobs. China objects to this idea.
On March 11, Chinese Ambassador to Nepal Hou Yanqi held a long conversation with Home Minister Bal Krishna Khand to discuss Tibetan refugees and China’s security interests.
China’s renewed security concerns stem from recent developments in South Asia and Nepal, says Sundar Nath Bhattarai, the vice-chairman of China Study Center, a think-tank.
“America is advancing its Indo-Pacific Strategy in South Asia. There is a growing military and strategic cooperation between India and the US, and China’s relations with India are souring due to border disputes,” he says. “The Chinese are thus concerned with possible instability in South Asia.”
Bhattarai adds that as the US and other Western countries are yet to accept Tibet as an integral part of China and are investing in Tibetan refugees, China is paying close attention to recent developments.
Another issue that has raised Beijing’s eyebrows is the phone conversation between Prime Minister Sher Bahadur Deuba and US Secretary of State Anthony Blinken on Russia’s invasion of Ukraine. During the tête-à-tête on March 2, Deuba had intimated to Blinken that Nepal stood in support of Ukraine’s sovereignty and territorial integrity. The following day, Nepal voted in favor of the UN resolution on Ukraine. Before that, Nepal on February 24 had opposed the Russian invasion of Ukraine and called on peaceful resolution of disputes through diplomacy and dialogue.
Though Nepal’s position on Ukraine is in line with its stated foreign policy, Beijing suspects Washington is influencing Kathmandu in its policy on Russia and Ukraine.
Growing engagements between Kathmandu and Washington in recent months are viewed with skepticism in Beijing. To offset the US influence, China is banking on Nepal’s communist forces—mainly the CPN (Maoist Center) and the CPN (Unified Socialist), two coalition partners in the current government led by the Nepali Congress.
Chinese officials are said to be in constant communication with Pushpa Kamal Dahal of Maoist Center and Madhav Kumar Nepal of Unified Socialist. The two leaders are in turn conveying their concerns to Prime Minister Deuba.
“Beijing wants Kathmandu’s solid assurance on its security concerns in Nepal,” says Rupak Sapkota, a foreign policy expert.
For China, implementation of past agreements with Nepal under its Belt and Road Initiative (BRI) remains a priority—even more so after Nepal passed the American MCC compact.
China thinks it is high time to push the BRI projects in Nepal. Kathmandu and Beijing had signed a framework agreement on the BRI in 2017. The BRI projects have made no progress even though the two countries had agreed to expedite their implementation during President Xi Jinping’s Kathmandu visit in October 2019.
Officials have been working to finalize the investment modality for the BRI projects in Nepal, but they have not made much progress due to lack of clear political guidance.
“Nepal is not solely responsible for the slow progress on bilateral issues with China. But Deuba’s apparent indifference on China-related issues cannot be overlooked,” says Sapkota.
China expects some headway on the BRI projects during Wang’s Kathmandu visit.
Bhattarai, the vice-chairman of China Study Center, says the MCC compact would not create any obstacles f0r the BRI projects.
“We have to implement the agreements with China. I do not think Americans can create obstacles in our relations with our northern neighbor,” he says.
With China prioritizing the BRI in Nepal, Chinese ambassador Hou has also started pressing the Deuba administration, through different channels and leaders, to do the same.
She has in recent times met President Bidya Devi Bhandari, Speaker Agni Sapkota and Maoist Center chair Dahal to convey Beijing’s message.
On March 11, China’s official mouthpiece Global Times published an interview of President Bhandari in which she called for “common effort” to expedite BRI projects.
While Nepal as a sovereign state is free to decide on its own—on MCC compact or on Ukraine—foreign policy experts say it should take neighboring countries into confidence before making decisions with geopolitical implications.
“If any of our neighbors express skepticism over our decisions, it is prudent to explain to them our rationale—that is not happening,” says Sapkota.
Mrigendra Bahadur Karki, executive director at Center for Nepal and Asian Studies, says after the compact’s endorsement Deuba’s key foreign policy challenge is to create an environment of trust with China.
“The Chinese side has also realized that it should build good rapport with the ruling Nepali Congress (NC) to secure its interests in Nepal,” he says.
Over the past few years, the relationship between the NC and China has not been very smooth.
The Deuba government has raised the issue of China’s alleged border encroachment in Humla district. A Home Ministry report had concluded in October 2021 that there were “some issues” at the Nepal-China border, which China has denied.
Then there is cross-border trade. Nepal-China border points remain virtually closed despite Nepal’s repeated request to ease the movement of goods through them. Nepal’s export to China has almost stopped. Ahead of Wang’s visit, some progress is expected on the issue, as officials from both sides have started talking about easing trade bottlenecks at the border.
Similarly, China is yet to arrange for the return of Nepali students who were rescued and brought home in the wake of Covid pandemic. Commercial flights between Kathmandu and various Chinese cities remain suspended. At present, only a few cargo flights are in operation between the two countries.
Nepal is likely to bring up all these issues during Wang’s visit and seek China’s cooperation on their resolution. On the BRI, Nepal has some expectations with China. Even as China is pushing Nepal to select BRI projects, Nepal is in turn urging China to agree to more projects on a grant basis and to offer concessions on others.
“Wang’s visit could be beneficial as both sides will be able to convey their concerns,” says Bhattarai.
Along with bilateral issues, China is likely to push for the unification of Nepal’s communist parties, say political experts. They say China wants to install a favorable communist parties-led government in Kathmandu.
Chinese leaders have been encouraging Nepal’s communist forces to unite. Beijing was upset when the Nepal Communist Party, the largest and most powerful communist force in the country’s political history, split in 2021.
