Experts Draw Attention to Nepal’s Trade Imbalance with China

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Experts Draw Attention to Nepal’s Trade Imbalance with China

November 10: Experts have drawn the attention of all stakeholders to the disruptions in cross-border trade between Nepal and China stemming from the 2015 earthquake and the global COVID-19 pandemic, which according to them is yet to return to normalcy.

Speaking at a roundtable discussion titled "Nepal-China Trade: Prospects and Challenges," organized by South Asia Watch on Trade, Economics, and Environment (SAWTEE) on Thursday, they said that the specific challenges arising from the sanitary and phytosanitary (SPS) measures impacting Nepali products require prompt attention, as do the specific issues surrounding transportation, connectivity, and logistical aspects, in both exports and imports.

Issuing a recent statement, SAWTEE said that the discussion programme was supported by The Asia Foundation.     

According to SAWTEE, the discussion centred on the trade relationship between Nepal and China, examining the challenges within the overall trade ecosystem that have contributed to the lacklustre export performance.

According to a study conducted by SAWTEE on Nepal-China Trade, between 2020 and 2022, over 90 percent of the value of goods exported to China from Nepal was covered by the zero-duty list for the least developed countries (LDCs), but the utilization of preferences averaged 68 percent. 


SAWTEE’s Research Officer Rupesh Tha highlighted in his presentation that although China stands as Nepal's second-largest trading partner, the trade balance has distinctly favoured China. 


Tha said it is vital for Nepal to fully harness the advantages of zero-tariff treatment provided to over 8,000 products originating in Nepal and diversify its exports to China. Current bilateral agreements, such as the trade and payment agreement 1981, are outdated and ill-suited to the present circumstances and need to be reviewed, he noted. This is particularly pertinent as Nepal grapples with a significant trade deficit with China, he further said.   


Former Joint Secretary at the Ministry of Industry, Commerce and Supplies (MOICS), Rabi Shanker Sainju said that Nepal's trade with China is adversely affected by the high transportation costs resulting from its inadequate logistics infrastructure. With the evolution of the landscape of the Chinese consumer market, demand for high-quality products has increased, and this must be taken into account when looking to boost exports to China, he added.  


Achyut Dhungana, under secretary at MOICS, identified four key factors that should be considered for enhancing trade with China: infrastructure and logistics, the negotiation and execution of trade agreements, market access, and the facilitation of cross-border payments.

Dhungana informed that a meeting has already been held to discuss the review and amendment of the trade and payment agreement signed between the MOICS and the Chinese Ministry of Commerce to enhance bilateral trade relations. 

Ashok Kumar Shrestha, chairman of Nepal Trans Himalaya Border Commerce Association, emphasized the need for enhancing trust between stakeholders (public and private sectors) of the two countries, in addition to improving infrastructure, logistics, and connectivity, to build trust to give a boost to Nepal-China trade ties.

Highlighting the need for meeting phytosanitary requirements for the export of Nepali products to China, Shrestha suggested establishing a multifunctional quarantine laboratory.   

Former Secretary of the Government of Nepal Bindra Hada highlighted the longstanding history of bilateral trade relations between the two countries.  

Delivering the special remarks in the programme, MOICS Joint-Secretary Ram Chandra Tiwari said that Nepal's incentive structure doesn't place enough emphasis on supporting entrepreneurship, startups, and the overall industrial ecosystem, leading to a lackluster export performance. Moreover, he noted that the three-tier structure of the government under federalism has diminished collaboration between the different levels of government, resulting in ineffective resource utilization and subpar export performance. 

Participants drew attention to evaluate the trade consequences for Nepal following its graduation from the LDC category in 2026. They further suggested that studies on Nepal-China trade should also look into the impact on trade with China and the existing tariff benefits provided by China, and explore alternative trade agreements and provisions to safeguard Nepal's trade with China in the years after graduation.  

According to SAWTEE, the participants included trade experts, policymakers, and representatives from the private sector. 


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