China invests in Nepal as gateway to India's huge markets

Spending on billion-dollar infrastructure projects also seen as strategy to quell unrest

PUBLISHED : Monday, 11 March, 2013, 12:00am
UPDATED : Monday, 11 March, 2013, 5:42am

China's ambassador to Kathmandu was recently pictured in a traditional Nepali cap and silk scarf, digging with a spade to symbolise the laying of the foundations of a new dry port near the Tibet border.

The photo opportunity marked the latest in a series of major projects that underscore China's growing economic influence in Nepal, where it is building roads and investing billions of dollars.

Other Chinese projects in its impoverished, electricity-starved Himalayan neighbour include a US$1.6 billion hydropower plant which is expected to end power outages that extend to 14 hours a day in winter. Meanwhile China recently completed a 22-kilometre stretch of road in central Nepal connecting the country's southern plains with the Tibetan county of Kyirong, to form the shortest motorable overland route between China and India.

Analysts have questioned whether China's largesse is a gesture to a neighbour in need, or the result of a foreign policy which increasingly sees Nepal's roads and dry ports as a doorway to the huge markets of India.

"I am sure that these infrastructure projects will help win influence in Nepal but they will serve a dual purpose," said Purna Basnet, a Nepalese political commentator. "It will be easier for China to supply goods to India via Nepal. There is even a talk of connecting Kathmandu with their rail networks in Tibet."

Nepal has always been in the shadow of its southern neighbour India. Since the end of a bloody decade-long civil war in 2006 and the emergence of the Maoist rebels as the largest political party, China has been gradually making inroads as a counterweight to India.

Chinese ambassador Yang Houlan outlined Beijing's vision of Kathmandu as a trade gateway to New Delhi in a recent op-ed article in Nepal's English-language Republica newspaper, noting that the huge common market between China and South Asia provides great economic opportunities for both sides.

Many observers see China's investment in Nepal as a vital part of its strategy for quelling unrest at home: China is a country of 55 ethnic minorities where poverty is a major threat to security.

"In Tibet, unrest has significantly increased, so Chinese investment in Nepal should be understood in the context of China's integrity, which is very important for the giant nation," said Kathmandu-based strategic affairs analyst Lekhnath Paudel.