Dragon’s embrace: China’s expanding footprint in Nepal triggers local displeasure

Nepal-China relations, a relatively recent development, have grown economically since 2015. In 2016, Nepal called China an “all-weather friend” and became a signatory of China’s Belt and Road Initiative (BRI) the following year. Chinese influence on Nepal has gained momentum since 2018, with Beijing having a significant role in forming the Nepal Communist Party (NCP) and its subsequent impact on the NCP government. China’s influence in Nepal’s economy reached new traction as it quickly became the largest source of foreign direct investment and ousted New Delhi as Kathmandu’s largest investor because of the infrastructural projects undertaken under the BRI. One can trace Beijing’s subtle and slow influence (and interference) in Kathmandu’s politics even before 2015. In 2010, a leaked audio tape revealed that Krishna Bahadur Mahara was negotiating an NRS 500 million deal from a Chinese person to secure 50 MP votes for Maoist leader Prachanda. Mahara was then the second highest-ranking leader among the Maoists and faced a rape allegation in 2019. However, the visible Chinese influence surfaced when a new alliance was formed by Nepal’s two biggest leftist parties, namely, CPN-UML and CPN-Maoist Centre, ahead of Kathmandu’s provincial and federal election in 2017 and was said to be Chinese-backed to establish a political system in the Himalayan nation that would be in its favour. Later in 2019, the party-to-party alliance between Beijing and Kathmandu further deepened Beijing’s role in Nepal’s politics when the Chinese Communist Party (CCP) and Nepal Communist Party (NCP) signed a Memorandum of Understanding (MoU) on establishing fraternal relations between both parties. A report in Global Watch Analysis in 2020 suggested China “use corrupt leaders in economically weak countries to make inroads in those nations, Nepal being a case in point.” Therefore, the penetration of Chinese companies in these countries manifests their business interests and enables the Chinese state to intrude into the nation’s polity to ensure its long-term interests. The report further mentioned the increase of personal wealth of the then Nepalese prime minister KP Sharma Oli over the years, who is known to be behind the close ties between China and Nepal. Further, Oli is said to have circumvented government regulations during his tenure to ensure that Chinese companies were awarded critical projects, which entrenched corruption in the Himalayan nation. Last year, it was reported that a close relative of former Nepalese prime minister Sher Bahadur Deuba was involved with Beijing in an arms deal conducted in violation of due process and alleged to have inflated the price of items by 30 per cent. Notwithstanding the party affiliation, Chinese influence, thus, is seen to be widely present. The municipal election in the Kathmandu valley saw an independent candidate named Balendra Sah winning the election in 2022. Sah was often seen with staff of the Chinese embassy and Chinese journalists in several restaurants during his election campaign and it is believed that heavy Chinese funding led him to win the mayoral race. The target on street vendors in Kathmandu, which forms part of Nepal’s informal economy (about 62 per cent), is also frowned upon by citizens as part of his agenda of making space for Chinese outlets in the valley. Thus, one can decipher that Chinese influence has not been limited to just the upper echelons of Kathmandu’s politics but has also penetrated much deeper into the local level. Chinese influence in Nepal cuts across economic, social, economic, and political aspects and aims to increase its footprints through a soft power approach. Nepal is aligning with China’s “One-China policy,” and journalists in Nepal are discouraged from reporting on news critical of China, for instance, the Tibetan issue. This affected the country’s free and fair journalism. For instance, a state-run Rashtriya Samachar Samiti journalist was investigated for reporting on the Dalai Lama’s discharge from a New Delhi hospital for the issue being claimed “too sensitive.” The mysterious death of Balaram Baniya, Assistant Editor at Nepali newspaper Kantipur Daily, caught people’s attention as the death happened only a month after his breaking news on China’s border encroachment in Rui village, which falls under Nepal’s Gorkha district. Baniya, along with Kantipur Daily, had to issue an apology. Baniya faced brief suspension for covering this news, which other media then took upon for their investigation, questioning the then-prime minister. Earlier, the Chinese embassy’s interference caused 17 editors of Nepali media to issue a public statement condemning the Chinese embassy for threatening Nepali journalists and interfering in their work, creating obstacles in the smooth conduct of free press. On China’s part, it conducted a three-month-long training of journalists from Nepal on Chinese language and culture in January 2020, jointly organised by the Nepal-China Media Forum and Confucius Institute of the Kathmandu University, to develop bilateral relations with “newer dimensions.” Beijing intends to ensure Nepali journalists promote Chinese opinion and awareness in Nepal and avoid covering news that views China negatively. This is a standard diplomacy practiced by China the world over. Not just for Nepali journalists, promoting the Chinese language in Nepal also entered its educational institutes, a somewhat concerning factor of Chinese influence. It was reported in 2019 that many Nepali schools had made Mandarin mandatory, whereby the Chinese embassy covers Chinese language teachers’ salaries. Nepal’s Ministry of Education also signed an MoU with the Chinese Embassy in 2019, aiming to expand Mandarin in public schools. However, on the ground, it has not drawn appreciation from many parents of these school-going children. Nevertheless, China’s soft power in Nepal can be deciphered from the fact that as of 2023, Kathmandu University’s Confucius Institute has trained nearly 50,000 Chinese-language professionals for Nepal since its inception 16 years ago. Even though China has been maintaining its grip in Nepal through soft power, as highlighted above, it has side-by-side indulged in border encroachment, especially in Nepal’s northern border, engaging in a series of violations like drug and human trafficking, gold, and wildlife smuggling fraud and abuse of trade practices. According to the UK’s Telegraph investigation, Beijing’s salami-slice strategy has resulted in the Chinese encroachment of 150 hectares of land in Nepal in five districts, including Humla. About nine buildings in Humla were also alleged to have been constructed by Beijing as part of its encroachment. The border violations continued as encroachments of 36 hectares of land at ten places in Nepal’s northern border that it shares with China were reported in 2022. These encroachments covered more than seven of Nepal’s 15 districts bordering China, which include Dolakha, Gorkha, Darchula, Humla, Sindhupalchok, Sankhuwasa and Rasuwa. China’s land encroachments were coupled with its surveillance activities. However, the silence maintained by Nepal’s officials explains the intention not to trouble the close ties with its giant neighbour, even if it violates its sovereignty. Not just land encroachments, the two international borders Nepal shares with China, namely, Kerung-Rauwagadhi and Tatopani-Zhangmu (also known as Khasa) have been grappled with cross-border transit issues with China. The closure of the Tatapani border, the mainland trade route between the two countries since 1967, following the 2015 earthquake in Nepal, made the Kerung-Rauwagadhi border, the official Nepal-China border recognized in 1961, as the alternate trade route for Nepali traders to import Chinese goods. However, Beijing’s strict “Zero-Covid Policy” and complete border closing severely impacted Nepali traders’ livelihoods and incurred massive losses for the landlocked country’s economy. Even though the Kerung border was re-opened in December 2022, it did not impact any improvement for Nepali traders. Chinese imported goods were entering Nepal fortnightly, essentially creating a trade embargo. The border was closed by China less than a month after trade reassumption. The re-opening of the Tatopani border in May last year failed to improve Nepali traders’ freight movement as China stopped exports from Nepal. The border again witnessed a random closure by China, reducing trade on this border on various excuses, much to Nepali traders’ displeasure. Beijing’s upper hand in terms of its trade relations with Kathmandu has contributed to trade problems for the country and paved the way for a high trade deficit with Beijing. Moreover, China’s BRI document, the MoU on Free Trade Connectivity signed in 2017, which was never made public, recently revealed that Beijing is attempting to impose its economic hegemony on Kathmandu, use its currency in Nepal, and sell Chinese goods through zero customs. Nepal’s tourism sector, much affected by China’s zero-Covid policy and border closure, faced further disappointment when Chinese tourists who visited Nepal following the ease of border restrictions were found to book Chinese-owned hotels and shop at Chinese-owned shops. The Department of Industry (DoI) shows that 63 Chinese companies have registered with the DoI to operate hotels and restaurants in Nepal. Chinese tourists are in no way helping to boost Nepal’s tourism sector, a significant sector affecting the country’s economy. The locals perceive Chinese investments in Nepal that promised to bring respite to Nepal’s weak economy with doubt. A series of projects signed between the two countries, significant being the Nepal-China trans-Himalayan multidimensional connectivity system, that aimed to transform Nepal from a landlocked to a land-linked country, has yet to fructify and is endlessly delayed. However, a Nepali online magazine reported that these Chinese projects and trade agreements are mainly aimed at Beijing to assert its influence in the country, whereas the local Nepali population is facing the risk of increasing unemployment due to the deepening Chinese influx. This influx also pushes Kathmandu into further corruption, coupled with Beijing’s surveillance. Chinese telecom giant Huawei, infamous in Nepal for its bribery and covert operations, including lack of transparency worldwide, recently conducted 5G testing in Nepal, raising concerns about national security breaches in the country. The Pokhara International Airport, built with a $215.96 million loan from China’s Exim Bank, inaugurated last year and claimed as a “flagship project of the BRI” by China, soon faced a range of problems that brought the airport under scrutiny. The crash of a Yeti Airlines flight as it attempted to land at the airport, an unfortunate incident soon after its inauguration, revealed the airport’s ability to accommodate only smaller aircraft, raising concerns about its inability to attract traffic and regular international flights. According to a New York Times report, the Pokhara airport construction given to China’s CAMC Engineering failed to meet international standards. The CAMC inflated the project’s cost to further its business interest, undermining Nepal’s effort at quality control. There is a growing apprehension that because of the airport’s poor functioning, it will face a similar fate to Sri Lanka’s Hambantota because the airport must pay $3.2 million in annual interest to Beijing. Beijing did not reciprocate Kathmandu’s request to convert the loans into grants to ease the financial burden. China’s foothold in Nepal seems like a clear example of how quickly and in a short time, the dragon’s embrace can turn into a curse in disguise of investment. Given these host of issues facing Nepal, the think tanks in Nepal have continuously voiced concerns concerning accountability, intent, culpability, and interference by China in Nepal. The author is the chairman of Law and Society Alliance, a New Delhi-based think tank. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. 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