Though Nepal’s overall exports have slumped, the country’s exports to China have recovered in the current fiscal year 2022/23. According to the latest statistics of the Nepal Rastra Bank (NRB), Nepal’s export to China doubled in the review period compared to total exports during the same period last fiscal year 2021/22. The central bank statistics show Nepal exported goods worth Rs 1.35bn till mid-May of the current fiscal year, a sharp rise from Rs 674m during the same period last fiscal year. The country has witnessed improved exports to China after the northern neighbor reopened the Rasuwagadhi-Kerung border for two-way trade starting in late December last year. The Tatopani border was also reopened for two-way trade in early May this year. Ever since the outbreak of Covid-19 in early 2020, Nepal’s trade with China hit a roadblock with frequent closing and opening of the Rasuwagadhi and Tatopani border points from where the majority of inland trade takes place. Till December end of last year, border points were opened only for one-way traffic of goods from China to Nepal only. Even after the Rasuwagadhi-Kerung border was reopened for two-way traffic of goods, China continued to impose restrictions on the number of vehicles that could pass to its side from Nepal.

Only on April 1 this year, China reopened the Rasuwagadhi- Kerung border point fully for the two-way movement of people and goods. Subsequently, the Tatopani border point was also reopened fully for the two-way movement of goods only starting from May 1. “One of the reasons why Nepal’s exports to China have been recovering is the opening of the border points for exports,” said Pashupati Dev Pandey, President of Garment Association of Nepal (GAN).

NRB data show that readymade garment is one of the products which saw a resurgence in exports to China. According to the NRB, the exports of readymade garments grew by 284.1 percent to Rs 144.3m in the review period. “Readymade garments meant for tourists are being sold well in the Tibetan region of China,” said Pandey. “Nepal is exporting garments to China both through the land route and air routes.” Given that China itself is one of the largest producers of garments in the world, it is difficult for Nepal to compete with Chinese garments. “But there is room for growth of exports in niche garment products,” said Pandey. According to the NRB, the export of Rudraksha (dried stone fruits) and incense sticks also increased during the 10 months of the current fiscal year. But exports of goods not specified in NRB data have surged sharply which contributed to the overall rise in Nepal’s exports to China. The export of such goods grew by 345.3 percent to Rs 913m. An official at the Department of Customs (DoC) said that Nepal has been sending five containers of goods a day on average in the last 20 days to China through the Rasuwagadhi border point. “Handicrafts, carpet, and utensils are among the goods being exported through this border point,” the official said. "But China is yet to allow the export of food items from Nepal.” Despite being a next-door neighbor, Nepal has failed to boost its export to China. China has also been providing duty-free and quota-free market access to thousands of Nepali products which are available to Nepal for being a least developed country. According to the Nepal Trade Information Portal of the Ministry of Industry, Commerce, and Supplies, China has been providing zero tariff facilities for about 8,000 goods originating in Nepal. These goods make up 95 percent of the total export of Nepal to China. To receive the Chinese zero-tariff facilities, exporters are required to fulfill certain rules of origin conditions for their goods. Despite such a facility, Nepal has been failing to utilize the duty-free facility and boost exports. One of the reasons, according to officials and experts, is the strict documentation requirements to get export clearances from the Chinese authorities. The World Bank in its Nepal Development Update Report in April 2021 pointed out that Nepal has the potential of exporting 12 times higher than its existing annual exports with the highest potential of boosting exports to China. The multilateral agency has termed the untapped export potential as ‘missing exports’. From the perspective of destinations, Nepal’s largest ‘missing exports’ are with China (by $2.2bn), followed by India ($1.2bn), the United States ($800m), and Japan ($700m), according to the report. According to GAN President Pandey, the thin population in the bordering Tibet region also limits Nepal’s export potential to China.