The appointment of Yang Houlan as China’s ambassador has been the most high-profile diplomatic appointment to Nepal so far. This reflects the evolving priority accorded to this small neighbouring country in China’s foreign policy strategy. With huge amounts of money being pumped into the Nepalese economy, it will be interesting to see if Nepal will be able to sustain a balancing act between its two giant neighbours.
The major thrust for this move comes from the fact that the previous plenipotentiaries in Nepal have been unable to bring about expected results in terms of Nepal’s adherence to the one-China policy. In fact the previous few years have witnessed an escalation in anti-China protests by Tibetan activists undeterred by the Nepalese authorities. However, just the nature of high level focus by China has prompted Nepal to toe the Chinese line. What past ambassadors could not achieve happened within a month of the new ambassador’s appointment. First, at least a dozen Tibetan exiles gathered to celebrate a religious event were detained and then around 800 Tibetans who had gathered to celebrate the Dalai Lama’s birthday at the local Namgyal Middle Boarding School at Swoyambhu, Kathmandu were dispersed and some of them were arrested as well.
For precisely these reasons China is also determined to improve its economic relations with the country enabling it to be effectively used as a transit country for South Asia. China’s Tibet Autonomous Region (TAR) shares an approximately 1414km border with Nepal making it essential to maintain stability on the border for other economic activities to be carried out. The growing economic engagement is visible in the increase of the trade volume by 80 per cent in a single year from 2009-2010 (US$ 744 million).
Besides the construction of a 770km railway connecting the Tibetan capital of Lhasa with the Nepalese border town of Khasa, China is involved in several other projects in Nepal like the Melamchi water project, hydel & telecommunication and infrastructure projects including the development of Lumbini and Pokhara as well as the Tato Pani and Kathmandu Ring Road. The catch in this FDI-led development remains that most of the labourers being employed for building these projects are Chinese and not necessarily creating employment opportunities for Nepalese citizens.
In March 2011 General Chen Bingde, head of the People's Liberation Army General Staff Department, visited Nepal and signed a number of contracts worth US$ 20 million to build a military base on the Tibetan border. However, the Sino-Nepal trade is highly imbalanced in favour of China and the Chinese authorities realize that if they have to generate goodwill for their economic endeavours in Nepal they will have to make certain concessions. To negate any overtures on that behalf, China has introduced a zero-tariff facility for over 4,000 Nepalese goods. But given the nature of China-Nepal trade there are hardly any goods that Nepal can trade or use to balance China’s massive investments.
China’s new found interest in Nepal has been welcomed by the locals since many Nepalese feel concerned about Indian hegemony in the region and public opinion of India is by and large quite negative. The statements by the new Chinese envoy Chairman Dahal have reassured Nepal that “China will never deviate from its policy of non-interference in the internal matters of Nepal.” By doing this China has avoided the pitfalls of Indian diplomacy which is dubbed ‘arrogant’ and unnecessary meddling in Nepalese affairs. India continues to be the largest investor in Nepal amounting to a total of 45 per cent of its foreign investment, but despite this, its economic endeavours are seen with scepticism and China’s increased assistance is seen as a positive balance to India.
Simultaneously, the appointment of Jayant Prasad as the Indian ambassador comes as an effort to recuperate from the losses in the preceding tenure of Rakesh Sood. Prasad is expected to capitalize on the engagement engendered during his father Bimal Prasad’s term, who served as the Indian ambassador to Nepal from 1991-1995 and whose tenure is regarded as exemplary. However the Chinese have also interfered blatantly in Nepalese internal politics. A 12-minute tape capturing a Chinese diplomat’s effort to bribe 50 Nepali legislators by offering US$ 6.9 million for help in forming a Maoist-led government that would favour China has already hampered public opinion towards China in Nepal.
If the Indian bear hug raised alarms in Nepal, then Chinese interference might meet the same fate in a few years. China’s dealings with Myanmar are an example of how its huge infrastructure developments have made Myanmar’s government wary of China. While Nepal certainly does not have sufficient diplomatic resources to handle the jostling for influence by its two bigger neighbours, it will benefit most by not aligning completely with one power against the other.