By SRF DR. RAMAN KUMAR
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12 June, 2020
Chinese Footprints in Nepal under One Belt One Road (OBOR) Initiative
1. China has been looking at Nepal for expansion of the footprint of OBOR initiative while Nepal sees the initiative as an opportunity for boosting its economy, to develop infrastructure for better connectivity within the country and as an alternative to reduce dependence on India.
2. Nepal signed the MoU on OBOR in Dec 2014 and joined the initiative officially in May 2017. A number of projects were discussed and MoUs were signed during PM Oli’s visit to China in June 2018. In April 2019, Nepalese President Bidya Devi Bhandari attended the second Belt and Road Forum (BRF) in Beijing. During President Xi Jinping’s visit to Nepal in Oct 2019, more than 20 agreements/MoUs were signed. His was the first visit by a Chinese President to Kathmandu in the last two decades.
3. Initially nine projects, mostly connectivity and energy-related, were proposed as the first batch of projects under the initiative.i The joint communiqué issued after the second BRF included the Trans-Himalayan Railway Project.ii That was the first time a specific Nepali project was mentioned in official OBOR documents. Nepal, historically, has road connectivity with China via the border posts of Rasuwagadhi and Tatopani for bilateral trade and tourism.
4. Major connectivity and infrastructure projects by China in Nepal other than the Trans-Himalayan Railway include renovation of Tribhuvan International Airport, construction of Pokhara International Airport, Kathmandu monorail project, Rasuwagadhi Hydel project, development of China-Nepal Friendship Industrial Park, 400 kV Trans-Himalayan Power line linking Kerung with Rasuwagadhi, construction of dry port in Rasuwa, etc. In Feb 2019, China was given the exploration rights of natural gas and petroleum in Nepal at 10 different locations along the Indian border.iii
5. Apart from internet bandwidth connectivity from Indian side, Nepal is also connected with an OFC cable through Kerung-Rasuwagadhi border point to the internet infrastructure of China. Last year China Communications Services International Ltd, a Chinese company, was contracted to lay 555 kms of optical fibers out of the planned 2,179 km long OFC along the Mid-hill highway connecting the eastern and western border of Nepal.iv Besides laying OFC, the Chinese company will also be installing radio access network for expanding 4G services.
6. China is the second largest trading partner of Nepal after India. In the year 2019, total exports to China stood above USD 33.5 million and imports from China were worth USD 1.48 billion. Nepal-China’s Tibet Economic and Trade Fair is a regular bi-annual event hosted by either side alternatively to enhance business interaction and promote economic cooperation between Nepal and Tibet Autonomous Region (TAR).v Under the Transit Transport Agreement (TTA) signed with China in September 2018, Nepal has been assured access to seven transit points in China, namely four seaports (Tianjin, Shenzhen, Lianyungang and Zhanjiang) and three dry ports (Lanzhou, Lhasa and Xigatse).vi
7. China is the largest source of Foreign Direct Investment (FDI) in Nepal. Sectors like infrastructure, hydro-power generation, construction, manufacturing and tourism attracted the most FDI from China. In the fiscal year 2019-20, China pledged FDI worth USD 88 million.vii During his visit to Nepal, President Xi also pledged investment worth USD 500 million. Chinese companies have been the main contributor in Nepal’s engineering contracting market, and they had signed contracts worth a total of USD 5.5 billion by the end of 2018.viii
8. Nepal Rastra Bank (NRB), the central bank of the country, signed an agreement with the Chinese central bank, the People’s Bank of China (PBoC) in 2015, enabling the increased use of Chinese yuan in bilateral trade and payment. NRB had allowed Nepalese banks to open accounts in Chinese currency in any Chinese commercial bank. Individuals and firms in Nepal having foreign exchange earnings have also been permitted to open yuan accounts in Chinese commercial and development banks.ix China's UnionPay card payment network in Dec 2018 linked up with Nepali peer SCT to launch an e-wallet service called Qpay. UnionPay cards are widely accepted in Nepal.x While the NRB had banned the use of WeChat Pay and Alipay in May 2019, permission was subsequently graqnted in May 2020 for both the digital wallets, to conduct their operations in Nepal.xi NRB has also authorised two commercial banks in Nepal namely the NMB Bank and the Himalayan Bank to provide settlement services for the transactions made in Nepal through WeChat Pay and Alipay respectively.xii
9. People to people (P2P) ties between the two countries have also increased in the recent years. Strong bilateral relations, visa-free entry, and growing air connectivity have been the key drivers of the Chinese travel boom to Nepal. Kathmandu is connected to major Chinese cities such as Beijing, Kunming, Lhasa, Chengdu, Hong Kong and Guangzhou through direct flights. According to the tourism authorities in Nepal, total 169,543 Chinese tourists visited Nepal in 2019, placing China as the second largest source of foreign tourists after India.
10. Around 6,400 Nepalese students are presently studying in China.xiiiChina provides scholarships to around 100 Nepalese students every year. More than 300 Nepalese students enroll in various medical colleges/ universities in China every year.xiv The two Confucius Institutes (at Kathmandu University and at Tribhuvan University) and several China Study Centres in Nepal are playing important role in advancing China’s soft power goals. Recently many private schools in Kathmandu has made Mandarin a mandatory subject; and the Chinese embassy in Kathmandu is paying the salaries of Mandarin teachers.xv
11. China is engaged in developing Lumbini, the birthplace of Lord Buddha, with plans to set up temples/ monasteries, convention centres and a Buddhist University, apart from airport and highway. In the garb of making Lumbini a major tourist attraction, China is trying to disseminate its own version of Buddhism through control over the monasteries, monks and teachings there.xvi Besides the Lumbini Project, China is also involved in funding of international Buddhist conferences and Buddha Jayanti celebrations organised in Nepal.
12. In July 2018, an umbrella body of Chinese NGOs, signed a MoU with the Social Welfare Council of Nepal (SWCN) enabling the first batch of 30 Chinese NGOs to work in Nepal for a period of 3 years.xvii The entry of such a large number of NGOs indicates that China is keen on making its presence felt in Nepal’s social sector.xviii
13. China has provided assistance to Nepal’s health sector earlier with the construction of a Cancer Hospital. Recently, amid COVID-19, China has donated PPE kits, masks, testing kits, infrared thermometers, etc to Nepal. Nepal has also given approval for the emergency use of China’s Sinopharm vaccines in Feb 2021.
References:
i https://kathmandupost.com/national/2019/01/18/nepal-trims-projects-under-bri-from-35-to-9-at-chinese-call
ii https://kathmandupost.com/national/2019/07/17/with-just-10-months-left-in-bri-pact-not-a-single-project-has-made-any-real-progress
iii https://kathmandupost.com/money/2019/01/18/china-roped-in-for-oil-and-gas-drilling; http://www.xinhuanet.com/english/2019-06/26/c_138174928.htm
iv http://www.globaltimes.cn/content/1150874.shtml
v https://mofa.gov.np/nepal-china-relations/
vi https://idsa.in/idsacomments/xi-nepal-visit-jpanda-mrittika-041119
vii http://www.xinhuanet.com/english/2019-11/07/c_138535703.htm
viii https://palmerbusinessnews.com/china-assisted-pokhara-airport-takes-shape/
ix https://kathmandupost.com/money/2015/01/05/nrb-allows-opening-yuan-bank-accounts
x https://asia.nikkei.com/Business/Companies/Nepal-bans-China-s-Alipay-and-WeChat-Pay
xi WeChat Pay and Alipay are particularly popular among Chinese tourists who want to pay via these apps for transactions in the hospitality sector in Nepal.
xii https://www.thestar.com.my/news/regional/2020/03/01/china039s-alipay-wechat-pay-permitted-to-provide-service-in-nepal
xiii http://www.xinhuanet.com/english/2019-08/28/c_138343188.htm
xiv http://www.globaltimes.cn/content/783267.shtml
xv https://thehimalayantimes.com/nepal/mandarin-made-mandatory-in-many-schools/
xvi The Asia Pacific Exchange and Cooperation Foundation (APECF), a Chinese NGO working in Nepal, is raising a fund of USD 3 billion for the project.
xvii https://www.business-standard.com/article/news-ians/chinese-nepalese-ngos-to-work-together-118073001054_1.html; https://thehimalayantimes.com/nepal/30-chinese-ngos-all-set-to-work-in-nepal/
xviii The Chinese NGOs are eyeing areas such as livelihood, healthcare, education, skill-based training, community development and disaster management.