A painful balancing act in China

Even as Beijing receives PM Dahal, its disappointment with Nepal Communist Party’s break-up might manifest in negotiations.

Anurag Acharya

Anurag Acharya

The Kathmandu Post


Even as Beijing receives PM Dahal, its disappointment with Nepal Communist Party’s break-up might manifest in negotiations. PHOTO: THE KATHMANDU POST

September 8, 2023

KATHMANDU – As Prime Minister Pushpa Kamal Dahal lands in Beijing later this month, he will be haunted by the memories of his last visit as Nepal’s premier in March 2017. The Chinese had refused to treat it as a state visit, citing a lack of preparations. But the sub-texts must have been clear to Dahal, who led a coalition with the Nepali Congress. Beijing was keen on cobbling up a left unity government in Kathmandu. The brief meet between Xi and Dahal on the sidelines of the Boao Forum must have been enough to convince Dahal, leading him to eventually reach out to KP Sharma Oli and other communist leaders to forge an electoral alliance later that year.

Very few countries had said “no” to Beijing back then. Nepal was already stressed due to its deteriorating relationship with India following the promulgation of the new constitution in 2015. New Delhi imposed an undeclared blockade, and the then Prime Minister KP Sharma Oli played the ‘‘China card’’, striking several agreements with Beijing, including the landmark Trade and Transit agreement. Nepal also signed to be a part of the Belt and Road Initiative (BRI), and Beijing enjoyed an unprecedented leverage in Kathmandu under the communist government that came to power in November 2017.

New order of things

Much water has flown under the Bagmati bridge since, as they say. South Asia has undergone a rapid change following the Covid-19 pandemic. Sri Lanka continues to endure a political and economic crisis; Bangladesh is also witnessing political turbulence, and ethno-communal tensions have ravaged India. China’s meteoric rise has been rudely punctuated, significantly slowing its economy. As discussed in the last piece, Covid-19-induced domestic, political and economic turmoil are the reasons. But, there has been a strong push-back from rival powers led by the United States, Japan and the European Union in the form of regulatory measures to check China’s aggressive economic diplomacy. So, what should Prime Minister Dahal expect when he lands in Beijing?

He should expect a warm but cautious approach from Beijing that expresses a deep disappointment over his decision to split the Nepal Communist Party, following differences with KP Sharma Oli. Beijing has since reached-out and reiterated its intention to establish closer ties with all political parties in Kathmandu. If that is true, reduced appetite to entertain party-level agendas and increased interest in business will be apparent. Besides, the elections are still away, and the rise of new political parties has made future political alliances uncertain. So, it will be self-explanatory if Beijing chooses to engage more in the agendas of economic cooperation.

Uneasy negotiations

Despite China’s domestic economic turmoil, Nepal’s hydropower is still an attraction for their companies as well as other large infrastructure projects. However, Beijing should be wary about repeating the mistake of jumping into vanity projects in Nepal that lack proper financial and economic rationale. The failure of Gautam Buddha International Airport in Lumbini to generate business, and the controversy surrounding the Pokhara International Airport do not reflect well on China. The Nepali delegation should also be mindful of nodding to any and everything that comes their way.

Both sides should consider the market before discussing any potential investments regarding hydropower. With India hesitant to provide a market for the power generated from the projects with the Chinese footprints, it is best to move on to other sectors or first ensure a new market on the Chinese side. But how feasible is a trans-Himalayan transmission line, economically and practically, in a geology vulnerable to natural and climate-induced disasters? Let the experts do the talking before politicians make commitments, which usually result in becoming social-media memes.

Hastily planned and last-minute outreach with the stakeholders do not yield productive outcomes. However, the Prime Minister’s Office should be undeterred from seeking necessary advice and feedback. My limited understanding makes me suggest that the delegation should focus on extending cooperation on practically feasible things that benefit us in the long run.

For instance, China has done wonders to increase its agriculture productivity, improving efficiency across various stages of producing, harvesting and packaging. The Nepali side should bring that knowledge, encouraging Nepali agri-businesses to benefit from it. This will help offset our annual food imports, contributing to food security and reducing external market dependency. The two governments should also focus on road connectivity improvement through the Koshi, Kali-Gandaki and Karnali corridors, connecting markets between the two countries. This will significantly boost our mountainous regions’ economy, adjoining China, which will be cheaper than investing in expensive and geologically challenging railway connectivity, lacking sufficient economic rationale.

An all-weather north-south corridor will also benefit Nepal in the long run if the relationship between India and China improves. However, by snubbing the G20 summit held in India this week, the Chinese President indicated the bleak prospects of that happening anytime soon. Creating high-end tourism and green transport infrastructures in Nepal to attract and cater to tourists worldwide is another agenda that the Nepali delegation can discuss with the Chinese side. Their enviable list of such infrastructures can be showcased to the visiting delegation. Nepal should not shy away from seeking Chinese support in improving its provincial public health infrastructures.

Finally, Nepal should attract more Chinese businesses during the visit. Located between two economic giants, there may not be many manufacturing prospects for Nepal, but the country’s expanding IT sector may still interest Chinese companies. The Chinese nationals have gained notoriety for colluding with Nepali and Indian nationals, and being involved in various cyber-crimes in recent years. Imagine the scope of a productive collaboration that contributes to both economies!

The negotiations with Beijing will not be easy, but the Nepali delegation should not be discouraged from strongly bargaining for their interests. More importantly, Prime Minister Dahal should prevent this visit from benefiting his personal and partisan interests and tempting Beijing back into entering Nepal’s muddled domestic politics. To consolidate his hold on power, his predecessor and political nemesis, KP Sharma Oli, tried to play the two neighbours against each other, but failed, harming Nepal’s foreign policy interests. It would be unwise of Dahal to go down the same lane.

This is the last piece in Acharya’s two-part series on Prime Minister Dahal’s upcoming visit to China. 

scroll to top