China-Nepal-India: An opportunity to seize?

By Zoon Ahmed Khan

When Nepal and China shook hands over the historic Nepal-China cross border railway agreement this month, it wasn't all stakeholders that celebrated this historic development. Nepal's advancements towards the Belt and Road Initiative have picked up pace in recent months as the small country seeks to boost avenues towards regional cooperation, connectivity and diversification. This mutual understanding to push bilateral engagement in various domains- from energy and trade to tourism, has not settled well with New Delhi, which still views Nepal as its own domain. But from Beijing’s standpoint this pushes two policy imperatives. It offers the Nepalese government needed infrastructure and diversification- and yet another olive branch to New Delhi. But in doing so, is India working against its own national interests?

Chinese Premier Li Keqiang (R) meets with Nepalese Deputy Prime Minister and Foreign Minister Krishna Bahadur Mahara in Beijing, capital of China, Sept. 7, 2017. [Photo: Xinhua]

India’s apprehensions with China’s growing presence emanate from a basic fear of being overshadowed. This mindset has been at the heart of India’s ‘string of pearls’ narrative, widely propagated by the country’s media, think tanks and policy makers alike for over over two decades. That China’s ultimate motive is to dominate India by increasing its presence in the Indian Ocean and smaller neighboring countries has led to a mindset to resist. However, in 2017, the difference in the comprehensive national power of both countries has changed drastically and so has their interaction. Beijing’s rise is not a regional power aspiration. And in this context India’s current approach towards geopolitical developments need some revisiting. In a time when both countries have discovered avenues of cooperation, to hold the ‘string of pearls’ as a point of reference is largely reductive. 

Specifically, in the context of Nepal-China relations, it was India’s carrot or stick tactic that pushed Nepal to diversify. Up until 2015, over 80% of Nepal’s economy was directly tied to India’s. This took a radical turn after the crippling ‘unofficial blockade’ in 2015. India’s policy to ensure just enough supplies to guarantee survival, came at a high political cost. The working assumption for proponents of this policy was that Beijing could not afford to sabotage a $40 billion trade surplus by coming to Nepal’s rescue. Clearly, this assumption was flawed. Immediately after the 5-month blockade, Nepal and China signed their first free trade agreements, cutting dependence from India. With the exception of some outstanding political issues, even today Nepal maintains a close relationship with India. But the one lesson that India should have learned from this experience is that coercive policies can have lasting consequences. 

Additionally, with the emerging multipolar order, to assume a position of privilege with small states is not an option anymore. The region is not India’s individual domain. For New Delhi, to view and apply different standards of engagement with China on itself, as compared to smaller neighboring countries, can further reduce India’s conventional role. Nepal has the right to push forward its own national interest and well-being of the Nepalese people. Since the blockade of 2015, to diversify became a question of survival for Kathmandu. While India continued to expand its trade and benefited from the Chinese products to catalyze its middle class boom, the expectation from Nepal to remain submissive was a tall one. Once Nepal’s trust was broken, little incentive remained. With increasing alternatives, and New Delhi’s own dependency on China, the strategy of dominating its own neighbors is likely to be a self-defeating one.  

In this light, it is also important to recognize that India’s own capacity to provide infrastructure capital and development assistance is not comparable to that of China’s. India’s own developmental challenges, economic stage, and limited capacity need to be understood in order to make more realistic goals. The railway agreement between China and Nepal was simultaneously met by a similar agreement between Japan and India. The comparison thus is not between China and India, but between China and Japan. Rather than resisting increased Chinese investment in its own backyard, New Delhi can choose to be a stakeholder. A China-Nepal-India railway corridor would benefit the long term interests of India by boosting regional connectivity, and trade. Additionally, maintaining direct linkages with China through Nepal can restore some political goodwill and public perceptions, hence serving New Delhi’s own national interests. 

It is worth mentioning that China and Nepal have both expressed their desire for New Delhi to join the railway agreement. For New Delhi to refuse such an offer will be in conflict with her own short and long term interests. By presupposing a need to compete with Beijing for influence, India is misjudging motivations. By refusing to support the developmental and economic aspirations of her own neighbors, India’s relative isolation and insignificance in her own backyard may become inevitable. On the other hand, a win-win situation is inevitable if India makes choices in line with its own national interest. And in this sense, the China-Nepal-India railway proposition is yet another olive branch- awaiting reciprocity and due consideration. 

(Zoon Ahmed Khan is a Research Fellow at the Belt and Road Research Institute, Tsinghua University)