China factor in Indo-Nepal Relations

The basic reason of Chinese presence in Nepal is to ensure that Nepalese territory is not

Used by Tibetans for breeding of discontent.  In the initial years, from 1950s to 1980s, the Chinese tried to build an economic presence in Nepal, which got enhanced tremendously post 1990s.

China has made inroads into Nepal in infrastructure, education and health sectors and has increased participation with Nepal at the economic front.


Soft policy

  • In the last decade, Chinese engagement with Nepal has got strengthened at soft policy level.
  • For that matter, China has opened up many Mandarin language training schools in the Terai region.
  • Chinese are providing Mandarin language training to Madhesis to ensure that in the near future, the Madhesis emerge as potential labours to work in the ever-expanding Chinese economy.



  • China is helping Nepal to fill the infrastructure gap.
  • Nepal wants to take advantage of the rail infrastructure built by China in Tibet. It committed to build a railway line connecting Kathmandu and Pokhara, with the birthplace of Lord Buddha at Lumbini.
  • China and Nepal signed agreements for all-weather road connectivity between Kathmandu and the Tibet Autonomous Region. Rasawagadi-Syabrubesi Road link also an important one.
  • Both countries have agreed to intensify the implementation of projects under the Belt and Road Initiative, now to be developed under the Trans-Himalayan Multidimensional Connectivity Network
  • Nepal is a part of Chinese Belt and Road Initiative with a SEZ promised.


Economic policy

  • Nepal agreed to allow Chinese banks to open branches and other financial services in Nepal and increase imports from China.
  • The two countries signed several MoUs, including one on Investment and Cooperation on Production Capacity, Human Resource Development Cooperation, and Economic and Technical Cooperation.
  • China has agreed to “take positive measures to facilitate Nepal’s export to China” and support “product development and post-harvest technology in agro-products” and wants to tap Nepal’s resources such as “construction materials, water conservation and hydropower and organic agriculture and herbs”
  • Both sides have also agreed to finalise the China-Nepal Free Trade Agreement (FTA).
  • The two sides have already concluded trade and transit agreements, and Nepal is eyeing connections with the Chinese market and oil refineries as well as the global supply chain via Chinese ports: Tianjin seaport to the east, Central Asia to west and beyond.


Administrative and security

Nepal also signed a treaty with China on mutual legal assistance in criminal matters, which will allow China to investigate cases of crime that might target Nepal.

Nepal acknowledged, Taiwan was an inalienable part of China and promised not to allow any anti-China activities on Nepalese territory. Joint Military Exercise Pact.

China will offer 100 training opportunities to the Nepalese law enforcement officers each year.

China agreed to build Madan Bhandari University for Science and Technology as a mark of respect for the late leader of the Communist Party of Nepal.



Reasons behind Nepal’s growing proximity with China

Indian policy errors – New Delhi was for long perceived in Kathmandu as “hawkish” and “selfish” in dealing with sensitive matters. The most notable instances of this include different river treaties, reluctance to respond to regular border-encroachment complaints, high-structure build-up along the border, inundation complaints, the armed border forces’ harsh behaviour, trade and transit crises, and embargoes.

People disbelief on India– the open border has always been a crucial area of contention.

Over reliance on india– Nepal has found itself heavily reliant on India, never acquiring the comparative advantage to increase exports. Unable to compete against lower-priced Indian products that flood the market.

India’s delay in implementation of various projects in Nepal more so vis-a-vis China and its implementation of agreed-upon projects. E.g. Mahakali agreement has remained without start for over two decades

Potential benefits from China– Nepal views the Chinese railway as an opportunity to bring Chinese pilgrims and tourists to Lumbini, the birthplace of the Buddha,

Ideological basis- The communist parties in Nepal have favoured and consistently protested against India. This time around the Nepali Congress also favoured them.


Way Forward

  • China’s engagement in Nepal is not new. Whether India will succeed in effectively competing with China to safeguard its interests and maintain its sphere of influence is going to depend on two overarching factors:
  • New Delhi’s overall capacity to challenge China, and
  • India’s political will to address its own controversial approaches towards Nepal.
  • Nepal cannot dispense with its reliance on India. India is and will remain vital for the country in many ways. However, India’s strategy to keep Nepal’s engagement with China to a minimum is no longer a viable option.
  • India must introduce new economic, developmental and infrastructure initiatives with Nepal that will not only bring tangible benefits to Nepali citizens but also address the vulnerabilities that will emerge in Nepal as the country engages with China.



  • India feels that the Chinese inroads into Nepal are necessarily to counterbalance the Indian influence in Nepal.
  • Nepal has asserted that its relationship with China is purely economic and will not be hurting the Indian strategic interests in any way.
  • The rising Nepal and China cooperation also signals that Himalayas are not a barrier anymore and for India, a strategy to check the Chinese engagements is required rather than reactions. Chinese strategy is to directly engage with the Nepali politicians and this has led China to build more trust.