Nepal-China Relations

The relations between Nepal and the People’s Republic of China are age old and deep rooted. Nepal-China relations have always remained friendly and cordial. The historic and multi-faceted bilateral relations between the two countries have evolved since the days of Nepali monk and scholar Buddhabhadra (Jue Xian Fa Si, early 5th Century), Princess Bhrikuti (first half of the 7th Century) and Araniko (Anige, Second half of the 13th Century) and early visits of Chinese monks and scholars like Monk Fa Hsian (Jin Dynasty), Monk Xuan Zang (Tang Dynasty), etc.

The two countries formalized their relations on 1 August 1955 by establishing diplomatic relations. The relations between the two countries have been marked by friendliness, mutual support and respect for each other’s sovereignty, territorial integrity and independence. Both the countries have relentless faith on the Five Principles of Peaceful Co-existence- the Panchasheel.

Nepal is firmly committed to One China policy and never allows its soil to be used for any inimical activities against China.

The two countries share a range of 1414 kilometers border in the Himalayan range of the northern side of Nepal.

Nepal has established its Embassy in Beijing, opened Consulates General in Lhasa, Hong Kong and Guangzhou and appointed an Honorary Consul in Shanghai.

Exchange of visits:

Both countries have a long tradition of exchanging high-level visits on a regular basis which have been contributing to strengthening and consolidating bilateral ties. Both countries have been utilizing the bilateral, regional and multilateral forums to hold meeting between the leaders to maintain regular contacts and share views on the issues of mutual interests.

Rt. Honb’le Vice President Nanda Bahadur Pun visited China in June 2017 to attend the 23rd Lhanzhou China Investment and Trade fair where Nepal was designated as the ‘Guest Country of Honor’. Earlier in June 2016, the Vice President also attended the 4th China South Asia Exposition and 24th China Kunming Import and Export Commodities organized by the Government of Yunnan Province of China.

The then Prime Minister Hon’ble Pushpa Kamal Dahal ‘Prachanda’ visited China from 23-29 March 2017 to attend the Annual Session of the Boao Forum for Asia (BFA) 2017 and held meetings with Chinese President Mr. Xi Jinping and other leaders of China in Beijing. He also addressed to the BFA’s Opening Session on 25 March on the theme “Globalization and Free Trade: the Asian Perspectives” emphasizing the need of further reinvigorating and making the globalization process further inclusive to better integrate the LDCs and LLDCs like Nepal in global trading. Earlier in October 2016, he had a meeting with the Chinese President on the sideline of the BRICS-BIMESTEC Outreach Summit in Goa India.

Hon’ble Deputy Prime Minister and Minister for Foreign Affairs Krishna Bahadur Mahara visited China, in the capacity of DPM and Finance Minister, leading a Nepali delegation to attend the ‘Belt and Road Forum for International Cooperation’ organized in Beijing in May 2017. He also visited China in July 2016 as special envoy of the Government of Nepal and in September 2016 to attend the 3rd China Tibet Tourism and Culture Expo in Lhasa.

The then Prime Minister Mr. K.P. Sharma Oli visited China in March 2016. Both sides signed several different agreements and MoUs including the Transit and Transport Agreement.

The then Premier of China H.E. Wen Jiabao visited Nepal in January 2012. State Councilor of the PRC, H.E. Yang Jiechi also paid a visit to Nepal from 24-25 June, 2013. Foreign Minister H.E. Wang Yi visited Nepal in 2015 to attend the ‘International Conference on Nepal’s Reconstruction.’ H.E. Mr. Liu Qibao, Member of Political Bureau and Secretariat of Communist Party of China (CPC) Central Committee and Chief of the CPC Publicity Department, the People’s Republic of China visited Nepal in December 2016 to attend the 7th China Cultural Festival. General Chang Wanquan, State Counselor and Defense Minister of China visited Nepal in March 2017.

Both countries have been maintaining a good momentum in regular exchange of visits at different levels with the aim to further maintain contacts, share views and ideas as well as to further enhance cooperation.

Bilateral Mechanisms:

The Nepal-China have Joint Consultation Mechanism, led by the Foreign Secretary of Nepal and the Vice Minister of the Foreign Ministry of China. This forum is instrumental in discussing overall aspects of bilateral relations. The 11th session of the Mechanism held in Kathmandu on 20 June 2017. During the meeting both sides discussed and shared views on pertinent issues of bilateral cooperation asserting the need for early conclusion of some of the important agreements and MOUs under negotiations.

Other bilateral mechanisms include- Nepal-China Inter-Governmental Economic and Trade Committee, Nepal-China Joint Committee on Agriculture Cooperation, Border Law Enforcement Cooperation, Border Customs Meeting, Joint Tourism Co-ordination Committee, Nepal-China’s Tibet Trade Facilitation Committee etc. These mechanisms have been convening at a regular interval to share ideas and push forward the cooperation by seizing the opportunities available in both counties.

Economic Cooperation:

The Nepal-China economic cooperation dates back to the formalization of bilateral relations in 1950’s. The first “Agreement between China and Nepal on “Economic Aid” was signed in October 1956. From the mid-80s the Chinese Government has been pledging grant assistance to the government of Nepal under the Economic and Technical Cooperation Program in order to implement mutually acceptable developmental projects.

The Chinese assistance to Nepal falls into three categories: Grants (aid gratis), interest free loans and concessional loans. These assistance of various kinds would be provided to Nepal via: different sources. The Chinese financial and technical assistance to Nepal has been greatly contributed to Nepal’s development efforts in the areas of infrastructure building, industrialization process, human resource development, health, education, water resources, sports and the like.

Some of the major on-going projects under Chinese assistance include:

  1. Upper Trishuli Hydropower Project- Power station and Transmission Line Projects (Concessional loan)
  2. Food/ Material Assistance (Grant) in 15 bordering districts of northern Nepal.
  3. Kathmandu Ring Road Improvement Project with Flyover Bridges -(Grant)
  4. Tatopani Frontier Inspection Station Project (Construction of ICDs at Zhangmu-Kodari)- (Grant)
  5. Pokhara International Regional Airport (Loan)

With the signing of the Memorandum of Understanding on Cooperation under the Belt and Road Initiative on 12 May 2017 in Kathmandu between Nepal and China, new avenues for bilateral cooperation in the mutually agreed areas are expected to open. Nepal expects to upgrade its vital infrastructures, enhance cross-border connectivity with China and enhance people-to-people relations under this initiative. The major thrust of the MoU is to promote mutually beneficial cooperation between Nepal and China in various fields such as economy, environment, technology and culture. The MoU aims at promoting cooperation on policy exchanges, trade connectivity, financial integration and connectivity of people.

The Government of the People’s Republic of China provided substantial and spontaneous support in search, relief and rescue efforts of Nepal following the devastating earthquakes of 2015. China has provided 3 billion Yuan on Nepal’s Reconstruction to be used in the jointly selected 25 major projects for 2016-2018 period. On 23 December 2016, Nepal and the People’s Republic of China signed Agreement on Economic and Technical Cooperation in Beijing to provide grant assistance of RMB 1 billion to the Government of Nepal for implementing the Syaphrubesi-Rasuwagadhi Highway Repair and Improvement Project, Upgrading and Renovation Project of Civil Service Hospital, and Mutually agreed Post-Disaster Reconstruction Projects. The Letters of Exchange to initiate Syaphrubesi-Rasuwagadhi Highway Repair and Improvement Project was signed on May 9, 2017.

Trade, Tourism and Investment:

China is the second largest trading partner of Nepal. In 2015/16, total exports to China stood at US$ 181 million with marginal increase from US$ 179 million in the previous fiscal year. In contrast, import from China has been growing at the rate of 39 per cent per year. It rose from US$ 421 million in fiscal year 2009/10 to US$ 1,247 million in fiscal year 2015/16. As a result, the trade deficit with China has risen from US$ 401 million in 2009/10 to US$ 1228 million in 2015/16. Although, China has given zero tariff entry facility to over 8000 Nepali products starting from 2009, Nepal hasn’t been able to bring the trade deficit down. Nepal exports 370 products including noodles and agro products to China. Nepal regularly participates various trade fairs and exhibitions organized in China. Nepal-China’s Tibet Economic and Trade Fair is the regular biannual event hosted by either side alternatively to enhance business interaction and promote economic cooperation between Nepal and TAR. The 15th Nepal China’s Tibet Economic and Trade Fair was held on 17-22 November 2015 in Bhrikutimandap, Kathmandu Nepal.

Nepal-China Non-Governmental Cooperation Forum established in 1996, which is led by the President of the Federation of the Nepali Chambers of Commerce and Industry (FNCCI) on the Nepali side and the Vice Head of the All-China Federation of Industry and Commerce (ACFIC) from the Chinese side. It is an initiative to mobilize the apex business organization of both sides to enhance cooperation between the private sectors of two sides. The 14th meeting of the Forum concluded in Kathmandu on 25-26 May 2017.

China is the largest source of Foreign Direct Investment in Nepal. Chinese investors have shown intent to spend over $ 8.3 billion in Nepal during the Nepal Investment Summit concluded in Kathmandu in March 2017.

China is the 2nd largest source of foreign tourist to Nepal. Over 100 thousands Chinese tourists visit Nepal annually. China has designated Nepal as the first tourist destination in South Asia for its people. The Government of Nepal has waived visa fees for the Chinese tourist effective from 1 January 2016. The Chinese Government has announced the year 2017 as Nepal Tourism Promotion Year in China. Both sides have been carrying out joint efforts to promote Nepal in China and encourage Chinese enterprises to invest in Nepal’s tourism sectors. Nepal has road connectivity via Rasuwagadhi and Zhangmu for trade and international travelers. There are 4 other border points designated for bilateral trade. Nepal has direct air link with Lhasa, Chengdu, Kunming, Guangzhou and Hong Kong SAR of China.

Education and Cultural Cooperation:

China provides scholarships every year not exceeding a total of 100 Nepali students studying in China. The Chinese side has been providing Chinese language training for 200 tourism entrepreneurs of Nepal for the next five years as per the understanding reached between two sides in March 2016. Both sides have been carrying out activities in culture and youth sectors as per the provisions of the MoU on Cultural Cooperation-1999 and MoU on Youth Exchange-2009. Both sides have been promoting people-to-people relations through regular hosting of cultural festival, friendly visits of the peoples of different walks of public life, exhibition, cultural and film show, food festivals etc. Sister city relations between the cities of two countries are growing and both sides have agreed to push cooperation though such relations. These relations are basically meant for carrying out exchanges and cooperation in the fields of economy, trade, transportation, science and technology, culture, tourism, education, sports and health, personnel, etc.

Regional and International Affairs:

Nepal is the founding member of the AIIB. Nepal holds the observer status in the Shanghai Cooperation Organization. Both countries are also the member of the Asia Cooperation Dialogue. China is the observer of the SAARC. Both countries have been cooperating each other in various regional and UN forums on the matters of common concerns.