Nepal Prime Minister KP Sharma Oli’s China visit, expected from 2 to 6 December, would mark his first foreign trip since taking office in July 2024. Traditionally, newly elected leaders visit India first, signifying the close bond between the two countries. However, prioritising China for a maiden visit is often perceived as a strategic pivot.
For a country located in the foothills of the Himalayas, this visit has begun to raise antennas in Delhi. India’s overly cautious approach toward its neighbours, especially Nepal, often gives the impression that New Delhi’s regional influence is under threat. But stepping back, one might ask: does this moment signify another incremental shift, or could it herald a transformative turn in Nepal’s foreign policy?
The politics of the so-called “border blockade” contributed to a drastic rise in ultra-nationalism in Nepal, fuelled by anti-India sentiments. In 2016, Nepal introduced its first National Security Policy, which identified “open border (and) border encroachment” as key external threats. This was also a time when almost all major parties, including those friendly to India, began advocating for diversified ties with China.
Soon after Oli became the Prime Minister in October 2015, he made his maiden visit to China in March 2016. And unsurprisingly, Nepal sought to improve cross-border connectivity with China, including using Chinese ports for third-country trade—for which Nepal previously depended solely on India.
On the other hand, China saw existing thaw between India and Nepal as an opportunity to deepen its strategic ties with Kathmandu, a goal it has pursued since formal diplomatic relations were established with Nepal in 1955. This was crucial for Beijing on the security front, as Nepal shares a long border with Tibet and hosts thousands of Tibetan refugees. Moreover, taking Nepal out of the Indian sphere of influence would also signify a strategic victory for China over India’s regional supremacy.
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Cut to May 2017, Nepal signed the Belt and Road Initiative (BRI) with China, hoping to attract billions of dollars in investments and diversify transit and connectivity options. The ambitious Trans-Himalayan Multi-Dimensional Connectivity (THMDC) Network was supposed to enhance connectivity, and the Chinese engineering marvel was expected to defy Himalayan odds, linking Kathmandu with Shigatse in Tibet through roads and railways.
More than seven years and several rounds of feasibility studies later, no plan has emerged. For that matter, the BRI as a whole has not materialised in Nepal and continues to be in cold storage with not a single project executed. One of the critical reasons is Nepal’s apprehensions about high-interest Chinese loans.
As a landlocked nation with limited industrial resources, Nepal has always advocated its desire for more grants than loans, a preference India has delivered over the years. Whether during the 2015 earthquake, the subsequent reconstruction phase, or in the development of health and education infrastructure, India’s grants have been favoured over loans from China, which would come as a costly business to the Himalayan nation.
While China previously encouraged Nepal to identify projects under the BRI and advance development cooperation, this time, Beijing may lean toward offering smaller-scale, low-budget projects over billion-dollar mega investments to reduce the risks of non-repayment.
Nepal remains cautious about falling into a Chinese debt trap, carefully weighing its options to avoid financial commitments that could threaten its economic stability and sovereignty. Consider just one instance—the Pokhara International Airport, built with a ¥1,378.74 million ($188.89 million) loan from China’s Exim Bank, has failed to attract significant international traffic. This has forced Nepal to request Beijing to convert the debt into a grant. Oli is expected to raise the issue during his visit.
Similarly, in 2020, Nepal finalised a deal with China to access four Chinese seaports—Tianjin, Shenzhen, Lianyungang, and Zhanjian. These ports are about 3,000 km away, compared to the 700-km distance to India’s Kolkata port, which is well-connected by road and an open border. While the deal with China was promising, as it would have reduced Nepal’s reliance on India for third-country trade, no shipment has moved under this agreement so far.
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Nepal and China have also strengthened their security ties, with the PLA and the Nepali Army conducting joint military exercises focused on disaster relief, counter-terrorism, and high-altitude warfare. The first Sagarmatha Friendship Exercise took place in Nepal in 2017, followed by subsequent editions in China in 2018, 2019, and 2024.
With India concerned about China’s strategic manoeuvring in Nepal, these joint military exercises, as well as Nepal’s defence purchases from China, mark a notable shift. However, Beijing is looking beyond defence. Since Chinese President Xi Jinping’s visit to Nepal in 2019, China has been eager for Nepal to sign an extradition treaty, which would enable Beijing to legally pursue unregistered Tibetan refugees living in Nepal.
With Oli in power, Beijing would want to restart conversation around the treaty, but Kathmandu faces pressure from international human rights agencies and civil society, advocating for the freedom of Tibetan refugees in Nepal, making it unlikely that the treaty will materialise. Nepal’s signing of the extradition treaty could also jeopardise its ties with the US, which continues to voice concerns about the rights of Tibetan refugees. The US recently provided a $500 million grant for development projects under the Millennium Challenge Corporation.
Undoubtedly, China is more interested in deepening security and strategic cooperation with Nepal to counter Indian influence, monitor the activities of Tibetan refugees voicing for “Free Tibet,” and expand its market for defence products. This was evident during Xi’s visit, when bilateral ties were elevated from a “Comprehensive Partnership of Cooperation Featuring Ever-lasting Friendship” to a “Strategic Partnership of Cooperation Featuring Ever-lasting Friendship for Development and Prosperity.”
In the past decade, China has attempted to exploit the thaw in India-Nepal relations to achieve its strategic objectives. But by discounting the deep-rooted people-to-people ties between Nepal and India, the geographical challenges posed by the high Himalayan terrain, and the looming trust deficit surrounding Chinese investments, China seems to have achieved merely political rather than tangible gains in its strategic quest.
China appears increasingly aware of these geographical constraints and Nepal’s political instability, which have slowed progress. In response, it has shifted focus toward building public goodwill. A recent example is Beijing’s decision to exempt Nepali citizens from visa fees—previously ranging from $12 to $35—to encourage greater people-to-people engagement.
Rishi Gupta is the Assistant Director of the Asia Society Policy Institute, New Delhi. He writes on the Asia-Pacific affairs, strategic Himalayas, and South Asian geopolitics. He tweets @RishiGupta_JNU. Views are personal.
(Edited by Prashant)
