Expectations From PM’s Visit To China

Geographical neighbours, Nepal and China, have enjoyed sociocultural and economic ties since time immemorial. The bilateral relation has continued to grow over time. Their relation is based on ground reality, forward-looking and defined by the Panchasheel or the five principles of peaceful co-existence. For various reasons, Nepal and China are at different levels of economic development. Asymmetry existed between them in terms of land area, access to seaway, population and economic size; now the gap has extended to per capita income, industrialisation, technological prowess and overall human development index. No further comparison is needed.

Understandably, Nepal wants to narrow down the gap. Naturally, Chinese President Xi Jinping’s proposals of shared interests echo our inner voice – partnership in fighting poverty, creating various kinds of security networks, furthering harmony, promoting each other’s cultures, languages, civilisations, making the Earth a better place to live in.

Win-win projects

We have high expectations with China, one of our two immediate neighbours. With great confidence and enthusiasm, we have signed in 2017 to participate in China’s Belt and Road Initiative (BRI). With the formal engagement in BRI, Nepal and China have tried to develop suitable win-win projects, and find out models of investment. Nepal first sought Chinese support in 35 projects, narrowing down them just to nine following Chinese suggestion. 

However, the two countries are yet to decide on the projects that would be implemented within the BRI framework. Meanwhile, many rumours are swirling. Widely circulated disinformation includes, ‘Nepal is not interested in BRI projects’, ‘India and the West would not let the BRI succeed in Nepal’, ‘China wants to spread debt trap in Nepal’. This scribe sees no truth in any of these claims. Nepal has proposed several projects for Chinese investment. China has made it clear that it is up to Nepal whether to accept a BRI project. Nepal has never asked India or the West while making decisions on BRI projects. Sure, now BRI is one of many options Nepal can approach for funding. Doing so falls within international practice.

Those who caution us of the threat of the Chinese debt trap should be aware of the fact that what Nepal is seeking is foreign direct investment, be it from China or other countries. Chinese are investing not only in poor countries, but in rich ones as well. The US is the largest recipient of Chinese investment overseas. In 2022 alone, it amounted to US$ 28.66 billion. From 2005 to 2019, North America and Europe absorbed over half of all FDI from Chinese companies. In Asia, relative rich countries such as Singapore, Japan and South Korea lead the list. China also has remained a major FDI recipient country over the years. As to the investments, any project wrongly selected and implemented can lead to failures. 

As to Nepal, a national concensus is evolving that our interest is in project donation or FDI in priority sectors. We are committed to improving investment environment. Our public sentiment is against taking loans, and later governments are echoing the public voices. FDIs are endorsed for two reasons – to ensure the projects are economically viable, and to avoid the possible misuse of the loans, the latter also being the basis for our preference for project grants over monetary grants.

Prime Minister Pushpa Kamal Dahal ‘Prachanda’ is visiting China from tomorrow. Nepalis are expecting to see a meaningful deal with the northern neighbour that ultimately helps clear all circulating conspiracy theories. Prachanda is advised to request for the construction of Kathmandu-Kerung railway under Chinese grant. Based on a series of scholars’ discussions Chinese think tank Professor Sun Yong and I have organised, the railway is unlikely to recover the investment costs. But this does not mean the project is a wrong choice. The railway makes our trade through China viable. It provides Nepal second trade route. 

Good Neighbour Policy

For today’s strong China which helped us build Arniko Highway six decades ago at a time China herself was a weak economy, building the trans-Himalaya cross-border railway is not a big effort. Nepal and China need to find solutions to the alarming bilateral trade imbalance. Our trade deficit will shrink only if we can attract and utilise Chinese investment focused on generating local employment, promoting production of goods and services exportable to China. Tourism can be a second option, though it can be hampered by Chinese recession, Nepal’s domestic instability, break of wars and pandemics. Employment in China can be an option of last choice. Our emphasis should go with the domestic capacity building.

Scholars and policy-makers seem to be bothering over issues they could avoid. If grants are not a part of BRI, let us concentrate on getting Chinese investment in priority areas. Our participation in BRI does not stop us from lobbying to get Chinese grants. China upholds its long-held Good Neighbour Policy that has developed into a structured policy of "good neighbourliness, security and prosperity". China knows that a prosperous Nepal becomes more stable and less fragile to external influences, which means reduction in China’s worries over cross-border securities. Such dual tracks have remained in practice. Following our participation in BRI, China has been providing Nepal financial and project grants as before. As long as we get Chinese support, we do not need to worry whether it is categorised as a BRI project.

(The author is the Chairman of Nepal-China Social Relation Academy.)