The recently laid railway line between mainland China and Lhasa, the capital of the Tibetan autonomous region of China, means that the process of Tibet coming out of its closet will be speeded further, with important economic implications for Nepal. China has expressed its willingness to extend the new rail link close to the borders with Nepal and India. China’s rapidly growing trade with its southern neighbours is likely to get a boost if the opportunity was exploited. At the recent summit in Dhaka, China was accorded an observer’s status in SAARC. For landlocked Nepal, however, easier land transport with China, which can only take place via its Tibetan region, is even more important from both short-

and long-term perspectives. The idea of developing Nepal as a transit route for trade between India and China, the two Asian giants, can derive considerable strength from this transport artery.

But Nepal is unlikely to gain much merely because of its geographical proximity to the Chinese terminus. It is but a positive development for Nepal that China plans to extend the railway, under a three-year project, to Xigatze, the Tibetan town close to the Nepali border, by starting construction of a branch line next year. Nepal shares a 1,400 km border with China, with five border-crossings, with only Xigatze boasting a highway. Particularly important is Xigatze for China’s overland trade with both Nepal and India because of its nearness. Trans-Himalayan traders expect that with the new link with Xigatze, the cost of cargo transportation between Nepal and China will go down by up to 70 per cent, making the products of each cheaper in the other’s market. In the light of China’s ‘go-global’ foreign trade policy, the rail extension constitutes a relatively small but important step. Viewed thus, Nepal should speed up the construction of the planned alternative road that would link it with Xigatze — China has agreed to build the 22 km Syabrubesi-Rasuwagadi section, while Nepal has to upgrade the feeder road from Prithvi Highway to Syabrubesi, a project the ADB has agreed to support.

The growing Nepal-China trade is fine, but the former continues to incur a ballooning deficit with the latter, which now stands at about Rs.16 billion. Nepal needs to concentrate on upgrading the quality and price competitiveness of its products, as well as the reliability of supply, if it is to boost its exports considerably. Besides, it should learn how to turn to account the goodwill shown by the Chinese side; for instance, the Chinese had offered, not long ago, to allow a number of Nepali products duty-free entry. China’s ever-increasing global economic clout and the rapid economic development taking place in its southernmost region offer numerous economic opportunities for Nepal — in trade, tourism, joint investment, transport, etc. What Nepal needs is a set of policies and strategies based on realism to maximise the gains from the Chinese openings.