China livid at MCC compact’s passage, unhappy with its Nepal envoy

The US-China geopolitical tango in Nepal continues to provide all kinds of novel twists. Most recently, the two countries openly clashed during the recent MCC Nepal Compact ratification process. 

Even as these foreign powers jostled, Nepali political parties were busy slinging mud at each other.   

Nepal’s federal parliament did ratify the compact, as the Americans wished, but in the run-up to ratification Beijing tried mighty hard to stop it. It sees the $500 million development grant to Nepal as a part of America’s strategy to encircle China. But Chinese officials are themselves evasive when explaining why the compact is ‘anti-China’. 

What is beyond doubt is China’s anger at the compact’s parliamentary endorsement. 

“Nepali leaders are yet to realize the consequences of [the ratification of] the MCC compact,” a Beijing-based Chinese foreign ministry official who was not authorized to speak on the matter told ApEx on the condition of anonymity. “When they do realize, I am afraid it will be too late”. He chose not to elaborate on what he meant by “consequences”. 

The official, however, did say that the Chinese foreign ministry has reviewed its Nepal strategy post-compact ratification. 

The foreign ministry in Beijing has apparently concluded in its review that China’s presence in Nepal is weakening. President Xi Jinping is sending Foreign Minister Wang Yi to Kathmandu to explore ways to turn things around, says the Chinese official. 

He adds that the Chinese government is also unhappy with its Kathmandu-based diplomats for their supposed failure in curbing anti-Chinese activities.   

Hou in a spot 

The Chinese foreign ministry believes its Nepal representative, Ambassador Hou Yanqi, has failed to stop anti-Chinese activities and to effectively coordinate with Nepali political parties. 

A Chinese official associated with China’s diplomatic corps in Kathmandu told ApEx that in the lead up to the compact’s endorsement, there was lack of coordination among the Chinese agencies handling Nepal. Also speaking anonymously, he said the communication gap between Beijing and the Chinese Embassy was also growing. 

“The presence of the Chinese Embassy was weak,” says the official. “There are many things that went on here that our foreign ministry wasn’t aware of. She [Hou] could not coordinate and there was a communication gap with Beijing.”  

The official also blames ineffective coordination between Beijing and the Chinese Embassy in Kathmandu for the MCC compact’s endorsement.  

“Ambassador Hou should be answerable for the anti-Chinese activities that might erupt in Nepal following the compact’s passage,” he says. 

Even as Ambassador Hou appears not to be in the good books of the Chinese foreign ministry, Chinese officials in Kathmandu hold their foreign ministry as responsible for China’s waning influence in Nepal. 

“As Nepal is a strategically important country for China, Beijing should have appointed a strong diplomat in Kathmandu, someone with a good political background or even a high-level foreign ministry official,” he told ApEx. “Beijing instead picked a junior official and she could not handle her responsibilities effectively.” 

The official hinted that Beijing could be looking for Hou’s replacement to lead its Kathmandu mission. 

Ambassador Hou’s leadership had started coming into question at the start of 2021 when she failed in her brief to keep the Nepal Communist Party (NCP) united. 

Wang’s meaningful visit  

China decided to send its foreign minister to Kathmandu while the Chinese Communist Party was holding its Annual National People’s Congress, suggesting an unusual level of urgency at the unfolding events in Nepal. 

Unlike what has been reported in sections of Nepali media, Nepal’s Ministry of Foreign Affairs as well as the Chinese officials ApEx spoke to say Wang’s upcoming visit is both unplanned and unprecedented. 

Chinese officials say Wang’s main agenda in Kathmandu is to reassess Beijing’s geopolitical and security challenges, as China no longer feels secure in Nepal. 

“Implementation of the BRI projects in Nepal is important for Beijing,” says a second Kathmandu-based Chinese official who has long liaised between Kathmandu and Beijing. He was also speaking on the condition of anonymity. “But this time Beijing is more worried about the security challenges emanating from the compact’s approval,” 

During his visit, Foreign Minister Wang will also take stock of the political climate in Kathmandu. 

Beijing sees the current Nepali Congress-led government as pro-Western and anti-China. But its favorable perception of CPN (Maoist Center) led by Pushpa Kamal Dahal and CPN (Unified Socialist) led by Madhav Kumar Nepal has also changed after the compact’s ratification. 

The Chinese official says the CCP is unhappy with Dahal’s double standards on the MCC compact. 

“China wants the communist parties of Nepal to go into elections as a united force, and it is willing to play the role of an intermediary,” says the liaising Chinese official. This will also be the message Foreign Minister Wang will convey leaders of communist parties. 

Until six months ago, Beijing was confident that Nepal would not approve the US development grant. It had rested its trust on Dahal and other communist leaders like Madhav Kumar Nepal and Jhala Nath Khanal. That trust has since been shattered.   

“We tried hard to stop the MCC compact’s parliamentary approval, but we were left with no option when even the leaders who had earlier assured us of the compact’s failure started shaking under US pressure,” says the Chinese official in Kathmandu. 

The MCC saga has been a sobering experience for China. Beijing is reportedly reassessing its relations with Nepali leaders, particularly those it had trusted before. 

China is angling for new ways to engage Nepal post-MCC compact ratification. This exploration starts with Wang’s visit.