Nepal and China Emerging economic perspectives

Madhav Shrestha

The most conspicuous aspect of Nepal-China relationship is an understanding of each other’s sensitivities. Nepal has pursued one-China policy and a policy of not allowing anybody to create trouble against China in Tibet, and this has won China’s appreciation. China, in turn, has shown good understanding of Nepal’s delicate situation in South Asia and her aspiration for an independent role in the world.

When considered in the context of Nepal’s overall relations with China, Tibet occupies an important position. Of late, Tibet has been developing rapidly, and a modern railway network linking it with the rest of China will have good spillover effects on Nepal. The railway lines are likely to come to the Nepal-Tibet border through Lhasa within three years or so. And the proposed project of making Nepal a transit route for trade between India and China is likely to get a boost. Experts expect that the spillover effects of this network will come through Tibet’s southern frills to various accessible passes of the northern border of Nepal, and if the idea of transit point becomes a reality, Nepal will gain huge economic benefits.

Experts wonder where Nepal will fit in when China and India open their own trading points on the border and China completes the huge road construction extending along her border with Pakistan in the west and Myanmar in the east, facilitating China’s border trade with India and others. Nepal needs to minutely examine long-term trade advantages of being an entrepot or transit route. Tibet is a very sparsely populated plateau too far from the main centres of economic activities of China, and Nepal is not adjacent to the bustling commercial centres of India. Furthermore, the rugged topography and tedious distance stand in the way of normal operation. What is immediately required is an in-depth and comprehensive study to see its possible impact on the economy of Nepal. The study would be very fruitful only if it took a serious note of the long-term trade prospects of both China and India through this transit route.

In the last quarter of a century, China has achieved tremendous economic and noticeable technological progress. Its visible consequence is that she now enjoys greater influence and wider contacts with a growing number of countries in the world. Smart diplomacy and appropriate policies have immensely helped China to become a global player in terms of trading capability. Recently, India is also surging ahead in her external activities, backed up by her impressive economic growth and progress in other sectors. Both China and India have projected trade as the principal ingredient of their foreign policies.

China and India attach greater importance and higher priority to those areas which they deem appropriate to their national interests and aspirations. True, China has now become the second biggest trading partner of India. In a few years she is expected to emerge as the first largest trading partner. This convergence of interests speaks volumes and shows the trajectory of their relationship in the near future, indicating that the basic thrust of their national interests is being shifted towards the beneficial areas of trade—the trade economics now stand as the fulcrum of every other national interest of each country.

Most recently, India and China, along with Russia, have agreed to launch a joint business forum in India next March to start a tripartite cooperation in major areas of economy. Nepal, being not only much smaller in size and strength than either India or China as well as falling far behind in the level of development, seems left out of this scheme, although she is strategically linked to both.

In the last two years, this region has experienced much improved relationship. The tectonic plate under the crust of relationship is undergoing gradual transformation, which is perceptively noticed by analysts with their attention focused on this emerging development. Security concerns and sensitivities are in steady decline. Inter-state political rivalry, carried to the hilt till some years ago, has been pushed to the background. The theme of cooperation and peaceful means has now replaced the conflict and confrontation of the by-gone era. However, it is not yet the time proper to pronounce the end of traditional inter-state politics. But the indication essentially shows the beginning of an era of economics that reigns supreme now in both concept and practice of state diplomacy. Experts believe economics may lead to where politics has not.

The recent events tend to suggest that Nepal needs to understand these trend-setting developments and visualise Nepal’s future relationship with both China and India. Think and act we must, to move ahead, with a deep insight into these new settings, if Nepal aspires to ensure a secure place for her economic well-being and not let herself be excluded for her economic from any regional cooperation grouping that may come up.

Shrestha is an ex-foreign ministry official