China was seen as a friend in need for Nepal in 2015 and 2016 and up until 2019. There was a promise and prospect of connectivity by road and railways, there was a promise and prospect of conducting trade with third countries via Chinese ports, there was a promise of big aid for development, there was the visit of Nepali head of state and government to Beijing and there was the visit of President Xi Jinping to Nepal. High-level exchanges were so frequent that foreign press began to write Nepal is going into the fold of China.
Then things began to change.
First, the head of the government, K P Oli, appeared to cozy up with India and started to talk less with China. Then there was a split in Nepal Communist Party, to prevent which China made an all-out effort in vain.
Then there was the government change in Kathmandu.
Chinese media described Sher Bahadur Deuba as a “pro-India leader,” suggesting he would not be as friendly to China. Then followed an intense debate about the Millennium Challenge Corporation’s Nepal Compact, about which the Chinese side showed open reservations. Ever since Nepal’s parliament ratified the Compact on February 27, the Chinese side seems to be distraught.
Needless to say, Nepal’s relations with any friendly country and neighbors—India, China or the US—should not be dependent on one aid agreement. By that logic, Nepal becoming a signatory of the Belt and Road Initiative (BRI) should not irk the US and India, and Nepal receiving grants from the US should not be viewed as Nepal becoming unfriendly toward China.
But that’s not how geopolitical thinking goes.
The main worry among the Chinese is that the MCC grant may be used as a tool to jeopardize their security concerns and core interests. This reflects on their immediate response after Compact ratification by parliament. China’s emphasis on “interpretive declaration,” which it said it “has noted,” more than the Compact ratification itself is telling. The first point of the interpretive declaration is a strong message to both the US and China. It says that “by being a party to the Compact Nepal shall not be a part of any United States’ strategic, military or security alliance including the Indo-Pacific Strategy.” This clause seems to have been included by Nepali political actors primarily to assuage the Chinese perception that MCC is a part of the Indo-Pacific Strategy, which the Chinese believe is the US strategy to contain China.
“The interpretive declaration seems to be an effort made by the Nepali side to ensure China that Nepal will not allow the Compact to be used against the core security interests of China,” Dai Yonghong, Dean of School of Foreign Languages and Director of Center for China’s Overseas Interests Studies at Shenzhen University, told me in an email interview. “But the question is will the US side accept the interpretive declaration?” He asked. According to him, China was not and is not opposed to Nepal taking grants and assistance from countries like the US and India. “China’s concern is that such grant should not be targeted against the sovereignty and security of any other country,” he said.
“Some lawmakers have said that if the US does not comply with the interpretive declaration, the MCC Compact will be automatically invalid. I wonder if that will be the case,” he added.
Politicians in Kathmandu argue that the MCC episode will not and should not become a sore point in Kathmandu-Beijing ties.
“There was no way for Nepal not to take the US grant, we needed it,” said Chandra Bhandari, a leader from ruling Nepali Congress. He contends that the MCC grant was made controversial by our own leaders by dragging big powers into it. In his view, ratifying the MCC Compact does not spoil Nepal’s relations with China. “China is not thinking about MCC like we think it is,” he said. “Taking the $ 500 grant will not spoil our relations with China.”
Ideally, Nepal becoming a signatory of BRI should not irk the US and India, and Nepal receiving grants from the US should not be viewed as Nepal becoming unfriendly towards China. But that’s not how geopolitical thinking goes.
According to Bhandari, now that the Compact has been ratified, Nepal should be able to convince China that it, in no way, undermines China’s legitimate security interests vis-a-vis Nepal. “Nepal should be able to convince China that MCC will not pose a security threat to China,” Bhandari reiterated. “Nepal should say that Nepal is open to taking grants from any countries.”
The MCC episode is over and how much Nepal will benefit from the projects funded by the US government will largely depend on how well and smoothly the government of Nepal and the MCC will be able to execute and complete the projects on time. But the MCC saga is only one factor in creating sore points in ties between Kathmandu and Beijing. Mistakes have been made by both sides.
Forgetting China
By design or by default, Sher Bahadur Deuba, since he came to power, chose to engage less with China. Apart from some congratulatory messages upon his becoming the PM, and apart from communications initiated by the Chines side itself, Kathmandu and Beijing have not been talking much in the last seven months.
According to Chandra Bhandari, we have not been serious enough about our relations with China. “We must maintain equal relations with India and China,” he commented. He argues that Nepali actors are guided by the self-imposed fear of what other powers might think when it comes to maintaining engagement with China. “We even failed to bring the vaccines donated to Nepal by China on time thinking what would India do or how it would react,” he said, without mincing words.
One of the first things the government did was to pick a yet to be independently verified claim of Chinese encroachment on Humla district of Nepal. It formed a committee by bypassing the existing permanent bilateral mechanism meant for sorting out issues related to the border. The Ministry of foreign affairs was also bypassed.
The study committee was formed under the leadership of the Home Ministry, no representative from the Foreign Ministry was included in it. When the committee submitted the report, we were told, Home Ministry quickly directed the Foreign Ministry to act on it and raise the matter with China. The story ends here.
The MCC saga is only one factor in creating sore points in ties between Kathmandu and Beijing. Mistakes have been made by both sides.
Interestingly, however, the report which the government has kept secret was leaked out to the BBC. Any actor who leaked this ‘sensitive’ report should have been immediately held accountable. But forget Deuba, none of the members in the Cabinet seem to have even thought about it. Actually, those involved in such fraudulent acts have often been spared. The Humla encroachment story actually comes from a dubious and clearly fake one-page document—the language, content and style everything looks suspicious. The previous government had promised to investigate the matter and punish the culprits. It failed to do so. The current government has not taken it up.
If Deuba’s study committee helped in anything, it was in making the border encroachment claim go global. With the BBC reporting it, it has become a universal story for anyone to cite as the ‘truth of proof.’
“Issues related to the border are not something to be dealt with through the rumors, media reports, or public speeches. If there are issues they have to be raised through diplomatic means,” said Chandra Bhandari, the Nepali Congress leader.
Foreign policy observers say the government should make the report public and let the people know the truth. There is no reason why the government has to keep the report secret, argues Gopal Khanal, a foreign affairs critic who also served as the foreign affairs advisor to K P Oli when he was the Prime Minister in 2016. “Bring the report out. If there is the issue of encroachment talk to the Chinese side, if there is no such issue tell us that there is no any issue.” The government cannot use it as a tool to create misunderstanding in bilateral relations between Nepal and China, he said.
The government’s apathy toward China was palpable in ambassador appointments as well. Soon after coming to power, it recalled the Nepali ambassadors to China, India, the US, and the UK appointed by the previous government. The government then appointed new ambassadors in all of these countries but China.
Pradeep Kumar Gyawali, a CPN-UML leader who was the Foreign Minister in the government led by KP Oli, sees these cases as the “major deviations” of the Deuba government on foreign policy, especially with regard to China.
“We were in the midst of initiating the process of talks with India to resolve the Kalapani-Limpiyadhura-Lipulekh issue. We had started the conversation with India around this issue in the joint committee meeting when I was the foreign minister,” said Gyawali. Instead of following up on this, the government started to look for the issue which was not there in the first place. It unilaterally formed a committee to pick a non-existent border issue with China.”
The claim that China encroached on territory in Humla had surfaced during the tenure of Oli’s government as well. A committee had been formed to study the matter and it had concluded that there was no border issue with China.
“The government’s move to form a new committee to study the border issue with China seemed to be guided by political motive to please some force,” Gyawali added. According to him, the government is guided by the idea of creating a new story that Nepal’s relation with China is also not trouble-free. “They are trying to dilute the real problem and create new ones with the country with which we have had no problems,” he said.
The proposed visit of the Chinese Foreign Minister to Nepal is being seen as an opportunity for Nepal and China to sort out differences and clear the misunderstanding.
Gyawali describes the reluctance to appoint an ambassador to China as another major foreign policy deviation of the Deuba government. “While the government-appointed ambassadors in India the UK and the US, China’s mission was left headless as if it was not its priority as if we could do without the ambassador in China. Nepal’s China mission is run by a junior officer. It was as if Nepal was giving a message that our relations with China are not of big importance.”
China, however, is not blameless (for how China mishandled relations with Nepal see my essay ‘To China with questions and a message.’). One major reason why China is losing its goodwill in Nepal is that our trade with China via land routes has suffered tremendously, largely because the Chinese side has made no concrete efforts for smooth trade with Nepal.
Likewise, the Chinese side often shows the tendency of dealing with Nepal affairs through leaders whom they think are ideologically close to them. At times they seem to take party-to-party relations between the CCP and Nepali communist parties as bilateral relations. Since every political party in Nepal–communist or non-communist–agree on core matters on Nepal-China ties, the mindset that communist forces are pro-China and non-communist anti-China is obsolete.
Correcting the course
The realization in Kathmandu is that Deuba was not paying deserved attention to China. As such the proposed visit of Chinese Foreign Minister and State Councillor Wang Yi to Nepal is being seen as an opportunity for Nepal and China to sort out differences and clear the misunderstanding.
Chandra Bhandari is clear about what Nepal needs to do. “It is us who need to correct the course,” he said. “Chinese are extremely security conscious. We need to reiterate our commitment to One-China policy. We need to reassure them that Nepal will never allow its land to be used for anti-China activities,” he said. He is of the opinion that Nepal needs to keep the best possible relations with neighbors and warns that not doing so could lead to disastrous consequences. “If we keep alienating neighbors who will be with us during the critical times? Look what is happening in Ukraine,” he said.
Bhandari argues that China also needs to reassure Nepal that it has no intention to create obstacles in border trade and that its commitment to Nepal-China BRI cooperation remains unchanged. According to him, we also need to demand easy access to China for trade and commerce apart from asking for development assistance.
Former foreign minister Pradeep Gyawali is of the view that Nepal first needs to reaffirm its own policy consistency. “The government created confusions by its own acts. Nepal needs to say that it is not going to be a part of any alliance and it will never be,” he said. Regarding the Humla border controversy, Gyawali is of the view that if there really is an issue the government needs to start the conversation and diplomatic engagement to sort it out. “If there is no issue they need to say there is no issue,” he said. On BRI cooperation, Gyawali agrees with Bhandari. “This government has not spoken a word about the projects under BRI Cooperation since it came to power. Now they need to say that they are committed to the agreements pursued by the previous government,” he said.
Indeed, politicians and officials in Beijing and Kathmandu have much to reflect on, do soul-searching and correct the course to keep the friendly ties between the two nations from sliding. Kathmandu and Beijing have much to listen to each other, address each other’s concerns, realize the importance of the relationships and move forward.
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