Nepal’s Prime Minister Embarks on Trade and Energy Diplomacy Mission to China

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Nepal’s Prime Minister Pushpa Kamal “Prachanda” Dahal is set to embark on a crucial visit to China at the end of September. He will meet China’s President Xi Jinping during the four-day trip. This is a strategic move in a world where connectivity and cooperation are increasingly indispensable. Nepal’s diplomatic endeavors offer a glimpse into the nation’s evolving role.

Nepal is a landlocked nation. It depends on oil imports, the vast bulk of which comes from India. At the same time, its high mountains and swift rivers make it a potential hydroelectric powerhouse. So, energy is a key foreign relations priority. With global supply chains disturbed by recent events such as the war in Ukraine, Nepal will have to maintain good relations with both of its large neighbors, China and India.

Nepal between two economic powers

Prachanda’s visit to India in June deepened the two nations’ energy relationship. India is a big energy customer, and this means it has a lot of influence on Nepal’s energy industry. India’s Prime Minister Narendra Modi broadcasted this influence by proclaiming a strategic blueprint to augment power imports from Nepal to India. He set the formidable target of 10,000 megawatt-hours over the next decade. That number had previously been only 450 megawatt-hours.

Energy is just part of the story. India is far and away Nepal’s largest economic partner. India buys 80% of Nepal’s exports and provides 61% of its imports. And the trade relationship between the neighbors is growing fast.

By contrast, China provides 15% of Nepal’s imports, and exports from Nepal to China amounted to $5.39 million in 2022. China has increased its involvement in the Nepali economy in recent years, serving as a key investor in Nepal’s infrastructure development. China has pledged Nepal access to some of its ports so that the landlocked country will no longer have to rely on others to conduct global trade. Additionally, both nations embarked on an ambitious project to establish a trans-Himalayan railway network linking Kathmandu with Tibet.

For Nepal, the challenge will be to avoid taking sides and instead to promote a multilateral solution that will benefit all parties involved.

What is in store for Nepal and China?

Prachanda’s visit signifies not only bilateral cooperation but also Nepal’s aspiration to become a regional energy hub. Nepal and Bangladesh have just made an energy export agreement, and Prachanda will likely negotiate an export agreement with China as well during this visit. China is the world’s largest manufacturer, and that industry consumes a gargantuan amount of electricity. Nepal is an obvious choice as a partner for China.

Source: Fair Observer (Syed Raiyan Amir)