The bilateral relationship, which has mostly been a story of Nepal being the recipient of Chinese grants, has been elevated to the comprehensive strategic cooperation for development and prosperity.
--BY NAVIN SUBEDI
When Jiang Zemin visited Nepal in 1996, China was barely able make it to the list of top ten economies and was trying to establish itself as the low-cost factory of the world. In 2019, when Xi Jinping came to the Himalayan nation for the first presidential visit by a Chinese President in 23 years, China has become not only the world’s second-largest economy – trailing closely behind the global hegemonic power - USA but is also a serious military power to be reckoned with.
China: The Emerging Global Power
Since Xi Jinping assumed control of three powerful offices in China in 2013– General Secretary of the Chinese Communist Party, Head of the Central Military Commission and the Presidency - China has adopted a policy of closer relationship with neighbouring countries.
Peace and tranquillity with 14 countries that share borders with China is a strategic requirement for it to achieve the goal of ‘national rejuvenation of the Chinese nation’. The ‘national rejuvenation’ is a long-term goal of the Chinese Communist Party - which aims to overcome two centuries of national humiliation by the hand of foreign forces - by 2049 when China celebrates the founding of the People’s Republic.
China has adopted an assertive posture in global affairs, coinciding with President Xi assuming office. It has declared its intention of creating a worldwide network of infrastructure projects for enhancing connectivity in the form of the Belt and Road Initiative (BRI). Developing countries such as Nepal, which is a signatory to the BRI, expect an inflow of Chinese investment for infrastructure development and in the productive sector. BRI is a juggernaut infrastructure development undertaking with substantial strategic importance as it requires trillions of dollars to finance, and influences ebb and flow of the global trade and commerce. For the western countries, it is equivalent to China’s challenge to the liberal world, underwritten by the US post-World War II.
The inclusion of BRI in the Chinese constitution signifies its importance to China in the coming decades. BRI serves Chinese interest in multiple ways: A means to export its excess industrial capacity, internationalise the Yuan and more importantly, to divert its trade from the US and Europe to countries participating in the BRI. Chinese analysts interpret BRI as a hedge against ‘Asia Pivot’ announced by former US President Barack Obama, which calls for shifting US military resources in the Asia-Pacific to counter the rise of China.
Nepal: China’s South Asian gateway
Despite the importance, China and the US have accorded to the Asia-Pacific in general and South Asia in particular, the lack of visit by a Chinese head of State to Nepal for more than two decades was interpreted by some as China’s reluctance to engage with the institutions created following the Peoples movement in 2006. On the other hand, a conspiracy theory of China aligning its policy towards Nepal in line with India was making rounds amongst analysts in Kathmandu.
In this context, Chinese President Xi’s recent state visit to Nepal was historical on all accounts. The bilateral relationship, which has mostly been a story of Nepal being the recipient of Chinese grants, has been elevated to the comprehensive strategic cooperation for development and prosperity. Given the absence of military/security dimension of the bilateral relationship, the thrust of this strategic partnership is more economic. It is natural for Nepal to seek Chinese support – in the form of financing and technical support – to achieve its goal of reaching middle-income status by 2025.
The visit was a subtle demonstration to the rest of the world as to how China, which will soon take over the mantle of the biggest economy, values its relationship with poor and weaker countries. Prime Minister KP Sharma Oli, in an interview with a national broadsheet daily after the state visit, expressed that he did not feel the pressure of dealing with a rising super-power during his meetings with President Xi. China also took into account Nepal’s peculiar geostrategic situation and its relationship with India. The body language of President Xi throughout his stay in Nepal was carefully choreographed to make the Nepali host comfortable.
The visit has long-term political and geo-economic ramifications for the region in general and Nepal in particular. The messages from the visit are loud and clear. China views Nepal as its gateway to the vast Gangetic plain. The Chinese President's announcement to support Nepal's willingness to overcome the problems of land-lockedness reverberated across all sections of Nepali society. Nepali public and analysts have interpreted this statement by the Chinese president as supporting Nepal’s dreams of establishing reliable transit to the high seas through Chinese territory to reduce reliance on India.
President Xi's reference to the Chinese way of goal setting and implementation is a reassurance to Nepal of China’s commitment to 'walk the talk' on the issues agreed between the two countries.
A New Narrative in the Making
The detractors of the incumbent government had ridiculed Prime Minister Oli's desire to improve all-round connectivity with China as a pipe dream. However, the Chinese side has made it clear at the highest level that it is committed to improving connectivity across the Himalayas and values its relationship with Nepal. Several memoranda of understanding (MoUs) were signed during the visit, including Chinese financing to undertake Detailed Feasibility Report (DPR) of the trans-border railway between the two countries, are significant for improving Nepal's connectivity with China.
Amongst the MoUs signed, the railway project has drawn the attention of the Nepali public, which is expected to cost at least two billion dollars and a decade to build. Nepal plans Chinese grant and highly preferential financing to construct the project. But a full grant from China for the railway project is unlikely, and the Chinese could push Nepal to agree on the financing modality as that of the cross-border railway line between China and Laos. The Laotian side has also contributed nearly 50 percent of the project cost while the remaining is a Chinese grant.
The detractors of railway project term the project as not only useless for Nepal but a ploy to push Nepal into ‘China’s debt trap’. It is no doubt that cost-benefit analysis of strategic projects such as this railway project is a must to determine the feasibility and attractiveness of the project to Nepal. But it is equally important to note that the cost-benefit analysis goes beyond simple direct payback or financial viability of the project. Non-financial costs and benefits are during the cost-benefit study — several assumptions influence what constitute the indicators for non-direct benefits. The project has many non-financial gains to Nepal. A single crucial non-financial gain to Nepal is an option to access the sea without being dependent on India. Similarly, the project and improved cross-border connectivity could be the single critical factor in improving the business environment. Similarly, China has issued a framework for assessing public debt sustainability for BRI participating countries in April 2019, in line with the framework adopted by the members of the Paris Club of Creditors.
The visit by the Chinese President was also a show of political maturity by the ruling and the main opposition parties. Both sides forged a consensus on major issues to discuss during the Chinese President's visit. Improving connectivity with China has now become a common agenda across the political spectrum.
The Chinese side, on the other hand, gave a clear impression of its willingness to engage equally with both ruling and the opposition party. However, even before the Chinese President left Nepal, a specific section started pointing out the need to engage with India, US and others in Nepal's interest.
Does Nepal hosting the Chinese President excludes it from participating in a bilateral relationship with India and other countries which matter most to Nepal? Nepal's relationship with its neighbours is not mutually exclusive. This state is an outcome of a tunnel vision of Nepal becoming a cloak in the broader geopolitical game. The concept itself is an outdated one. Nepal not only survived but also benefited from both the US and the Soviet bloc during the cold war. Even Nepal's infrastructure and social development got a significant boost with the funding from both blocs during this period.
Time will only tell whether the political bonhomie between the two countries translates into tangible gains or a pipe dream for Nepal.