To China, with questions and a message        

As the MCC debate heats up once again, accusing fingers are being pointed at China not only for making efforts to stall the ratification of the American grant but also about non-cooperation on Nepal-China land route trade.

Photo: South China Morning Post

Mahabir Paudyal

  • Read Time 9 min.

As a country that provided crucial support during the Covid-19 pandemic, with over 35 million doses of vaccines according to an estimate, on donation and purchase, along with syringes and equipment, China, in the last three years,  should have been among the most appreciated countries in Nepal. 

It is not.

Misgivings are growing, its role questioned and answers being expected on a number of issues. China is in debate, some hushed, some open and vocal. There are some such concerns, which, if not addressed timely, can jeopardize the relations between the two countries. 

Four questions

What actually contributed to making Millennium Challenge Corporation’s $500 million Compact with Nepal so disputed has become an open secret. After the secret letters written to the MCC headquarters by Prime Minister Sher Bahadur Deuba and Maoist leader Pushpa Kamal Dahal became public, all have known, hopefully China as well, who actually was playing the spoilsport on the MCC Compact grant. As such, it is unfair to drag China into the unfolding saga of the MCC debacle. The  Chinese embassy in Kathmandu was once reported as saying that it is okay with the MCC Compact as long as it is economic in nature. Chinese scholars and commentators writing in and giving opinions to Nepali media have raised questions on some of the contents of the Compact but they have agreed that it is up to the parliament of Nepal, Nepali leaders, and the Nepali government to decide whether to take or leave the MCC grant.

There is no hard evidence to implicate China but there are allegations and speculations. In a recent interview with The Kathmandu Post, a top MCC official, alluding to China, accused the “outside actors,” of making “malicious attempts to derail this compact”. There is a strong perception in Nepal that China is somehow fuelling the anti-MCC narrative and is throwing its weight behind the anti-MCC bandwagon. What gives credence to this perception is what seems like frequent communication between the officials of the Communist Party of China (CCP) and Maoist Center leaders, nearly all of whom are at the forefront of the opposition against the MCC. Another aspect to give credence to the perception is that most scholars and commentators who speak critically about the MCC happen to be those who sing laurels of China and China’s Belt and Road Initiative (BRI). As things stand, Nepali intelligentsia is divided into supporters and opponents of MCC and BRI. Exceptions apart, those who advocate for MCC do not advocate for the BRI and vice-versa.

Whether China is really working from behind the scene to help create the anti-MCC narrative in Nepal or whether it is influencing the Nepali political actors to stand against the $500 million grant agreement will be clearer in the days to come. If it has, it will become public knowledge one day. This is beside the point here. 

But it would be a mistake for the Chinese to believe, if so do they, that helping to scuttle the MCC Compact will help China. The Nepali scholars I have talked to have categorically said that once the MCC is made to fail, we will lose out the potential benefits from the BRI as well. Divided as they often stand, the intelligentsia, political actors, and even media who now are the advocates of the MCC will most likely turn against the BRI, if the MCC fails and it gets established that China was one of the actors behind it. 

Have the Chinese considered the possible fallout of the derailment of the MCC on BRI? 

Apparently, to address the Chinese concerns (expressed or unexpressed), Nepal’s Ministry of Finance sought clarifications from the MCC office if its Nepal Compact has any military component, whether it is a part of the Indo-Pacific Strategy and whether the Compact will in any way impede the implementation of the BRI projects in the future. The MCC replied to the government of Nepal that all these misgivings are false.  One of the questions Nepad had asked goes like this: “The provision of Section 6.3 (b), that in the event any conflict or inconsistency between the Compact and any other agreements, the Compact will prevail appears to prohibit the agreements that have already been entered into with others and even those that will be signed in the future. In particular, it appears as if this is a form of pressure applied towards not allowing the implementation of the agreements and understandings that have been entered into with China under the BRI.” The MCC said, “MCC Nepal Compact does not affect Nepal’s agreements with other donors or countries.”

Second, land route trade with China has become a serious concern in Nepal in recent times. Nepal conducts its trade with the world’s second-largest economy through two land border points—Tatopani of Sindhupalchok district and Kerung of Rasuwa district.

As things stand, our trade through Kerung and Tatopani has suffered a huge setback in the past few years. Kerung came into operation only in 2015 after the earthquakes. Tatopani has not become fully operational after the 2015 earthquakes.   These border points with China, and through which the Nepalis conduct much of their trade with China, are already unreliable and unpredictable.   Landslides damage access to these trade points nearly every year and nearly every year, the trade gets disrupted. Thus even in normal times, trade with China with these two routes does not become smooth. But after the Covid-19 outbreak, Nepal’s trade with China via land route has suffered tremendously.  Nepali businessmen doing trade with China through these two routes have routinely complained of non-cooperation from the Chinese side in resuming smooth trade. The traders and businessmen from Sindhupalchok, the district that adjoins Nepal’s border with China in Tatopani, say there has not been smooth supplies of goods from China to Nepal since 2015 and it has gotten worse since 2019. I have met many business people expressing frustration, complaining of non-cooperation from the Chinese side in clearing the consignments stuck in China toward the Nepali side. “Don’t ask how many times we requested the foreign minister, Chinese embassy and even the prime minister. They only promise to look into the matter, they never do,” a business leader from Sindhupalchok told me, exasperated.

While Nepal needs to be able to ask both China and the US not to bring their rivalries into their development assistance to Nepal, China and the US, on their part, should also not allow their rivalry to take precedence over bilateral relations with Nepal. 

Some of these business people attribute the non-cooperation on trade not to Covid-19 but to the MCC.  Those doing business with China through the Tatopani border point of Sindhupalchok say if the MCC is passed from parliament then the Chinese are permanently going to close the borders to Nepal. To me, it sounds like a pure exaggeration of the problem but this is what they think. In a recent press release, the Chinese embassy in Kathmandu refuted the charges.  If they held an interaction with business associations such as the Nepal Trans Himalayan Border Commerce Association or Nepal-China Chamber of Commerce and Industry, they would know better what actually is afflicting the land route trade with China and what the grievances of the traders are. 

But as it remains unresolved, no wonder some have started to call the current situation an ‘unofficial Chinese blockade on Nepal.’ As a country that has faced blockades in the past, Nepalis have an aversion to that word. 

So here is a second set of pressing questions China is expected to answer: Why has there been no smooth supplies from the land route to Nepal? What are the weaknesses of the Nepali side, if any? Why is China not cooperating on this matter, if it is not?

The Belt and Road Initiative (BRI) once was a beacon of hope for Nepal’s connectivity with China. There were a lot of talks about railway and roadways to Nepal during then Prime Minister K P Oli’s visit to China in June 2018, during Nepali president Bidhya Bhandari’s visit in April 2019, and during Chinese President XI Jinping’s visit to Nepal in October 2019. 

The big problem with the BRI is its opacity. Five years after the BRI agreement was signed with China in 2017, no one knows what was actually written in the agreement. Neither the Nepali nor the Chinese side has made it public. Nepali officials claim that they made a list of nine projects under the BRI and forwarded it to China but there has been no response from the Chinese side. What is the truth? Of course, the Nepali side has yet to finalize the financing modality of the BRI projects.  Yet the questions are raised now and then: Is China merely paying lip-service to BRI in the case of Nepal? 

Nepali students, who study in China but who had to return home in early 2020 because of the Covid outbreak, have not been able to return to their universities and resume their studies. The students complain that the Chinese side has not taken their problems seriously. These students have long been asking: When will we be able to return to the universities and resume our studies?

Question on benign image 

It may sound like a cliché but China enjoys positive public opinion including some perception bias in Nepal. Nepali public imagination is largely supportive of China. The rise and fast pace of development of China and China’s official commitment for the respect of Nepali sovereignty and territorial integrity of Nepal have largely contributed to making of that imagination.

There are some historical contexts too. China has vowed to stand by Nepal during difficult times. In 1962, Chinese Foreign Foreign Minister Marshal Chen Yi made a strong statement in defense of Nepal: If any outside force tried to interfere in the internal matters of Nepal, China would not sit quietly and would retaliate accordingly.  In the 1970s, as Nepal was fearing the prospect of ‘invasion’ from India, in the wake of the annexation of Sikkim, it was Chinese leader Deng Xiaoping who told American president Gerald Ford to help Nepal more. “It is necessary to help Nepal. They are a nation that can fight. Nepal isn’t Sikkim or Bhutan,” he is quoted as saying in Sanjay Upadhya’s book Nepal and the Geo-strategic Rivalry between China and India. 

China vowed to support Nepal during the blockade of 1989 and in 2015 as Nepal was struggling with the blockade, Chinese President Xi Jinping told the United Nations General Assembly: “All countries are equals. The big, strong, and rich should not bully the small, weak, and poor…The principle of sovereignty not only means that the sovereignty and territorial integrity of all countries are inviolable and their internal affairs are not subjected to interference.” It very much seemed like Xi was speaking for Nepal.

What became of that benign image of the Asian power? 

Expectations were high and excitement was big until Xi Jinping’s visit to Nepal.  All that began to change after the onset of Covid-19 and conflict within the then Nepal Communist Party (NCP) started to emerge. Breaking the long-held principle of silent diplomacy, the Chinese ambassador in Kathmandu was desperately trying to save NCP’s collapse. The way the Chinese envoy visited the households of top leaders for that purpose created bad optics.  This established that when it comes to interfering in internal politics of Nepal, China is no different from India.  

Tell the truth

Geopolitically, these are alarming times. The world’s two superpowers–China and the US–are in confrontation. British author Martin Jacques predicts the US-China estrangement will be long-lasting. Not less than 10, 20 or even 30 years, he says.

It is natural for countries like Nepal to guard themselves against falling into the geopolitical trap the continued rivalry between the two superpowers ultimately creates. Truth be told, if China-US relations were normal, like in the 80s for example, I presume there would be no debate on the American grants.  

While Nepal needs to be able to say to both China and the US not to bring their rivalries and competition into their relations with Nepal, not to put conditions and strings based on their rivalry on their development assistance provided to Nepal, China and the US, on their part, should also not allow their rivalry to take precedence over bilateral relations. Surely  Nepal does not want to be caught in the crossfire of the China-US confrontation. Nepal cannot afford to reject the development aids from the US because China does not want it nor reject the Chinese aid because the US may not approve of it.

As for the questions raised above, the Chinese side needs to communicate openly. Zhou Shengping, who served as the chief of Xinhua News Agency of Kathmandu Bureau, in his recent article ascribed China’s silence on the questions raised in Nepal to what he called the nature of ‘quiet and shy diplomacy’ of China. “The Chinese people think the best communication is telling people the truth without being rude to their faces. They also believe that actions speak louder than words,” he wrote.

But when it comes to the questions which could have a bearing on the relations between the two countries, they have to be answered, even loudly if necessary, so that the doubts do not become the truths, so that the truths don’t not fall in shadows. Beijing needs to know what Kathmandu is thinking.

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