Will China risk India investments by overplaying its hand in Nepal?

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China’s Nepal policies are changing as a result of India edging closer to the US-led containment strategy against Beijing in South China Sea.

What it took for Delhi to persuade Nepal’s Madhesi leaders to come to the Indian compound in Kathmandu on Thursday to celebrate Holi, we do not know. They had earlier taken a vow not to celebrate Holi.

They saw nothing to celebrate after the unceremonious collapse of their agitation following Delhi’s decision to end the blockade and ease the pressure on the leadership in Kathmandu.

Unsurprisingly, Kathmandu press is rife with speculation that Delhi is preparing for another phase of confrontation and is priming up the Madhesi leaders.

Indeed, South Block’s reaction to the hugely successful visit by Prime Minister KP Sharma Oli to China suggests that Delhi is in a punishing mood. When asked about Oli’s visit to China and the growing Sino-Nepali ties, the South Block spokesman snapped back:

“Nepal as a land-locked country is free to explore any practical option it wants. But our (India’s) relations with Nepal have their own natural logic. Now, we are not in the comparison business. And even if you are, do ask yourself, is there any other country in the world which can have the kind of relationship that Nepal has with India?”

The ‘comparison business’

The spokesman is spot on. Nepal is critically dependent on Delhi’s goodwill. But where he possibly misses the point is that the “comparison business” is not so irrelevant. The point is, what is it that draws comparison? If it is about trade or economic linkages, who can indeed compete with India on the Nepali turf? The facts speak for themselves. To quote the spokesman:

“We (India) have at present 26 Land Custom Stations with Nepal... Two Integrated Check Posts are under construction and two more will be undertaken in the next phase. Two rail links are under construction and three more will be undertaken in the next phase... 605 kilometres of roads... are under construction... Another 900 kilometres will be undertaken in the next phase. An MoU on the Raxaul-Amlekhgunj petroleum pipeline was signed... The 600-megawatt Muzaffarpur-Dhalkebar transmission line was inaugurated last month and India... is already exporting 330 megawatts of electricity to Nepal.

“Two thirds of Nepal’s global trade is with India, and over 90% of their third country exports/imports transit through India. Millions of Nepalese live and work in India, and hundreds of thousands criss-cross the open India-Nepal border every single day”.

Without doubt, the ground realities speak for themselves. Nonetheless, the “comparison business” is unavoidable because Oli’s visit highlights that China’s Nepal policies are changing course. They are increasingly assuming a thrust challenging India’s dominant presence in Nepal.

Reciprocal reaction

Suffice it to say, if Delhi edges closer to the United States-led containment strategy against China, it had better expect a reciprocal Chinese reaction in India’s neighbourhood. So far China has been single-mindedly pursuing self-interests. But that may be changing.

Oli’s current visit to China shows that Beijing is introducing templates of bilateral cooperation with Kathmandu which have at the same time an underlying agenda to “liberate” Nepal from the Indian “hegemony”. The trade and transit treaty, proposed free trade agreement, energy deal, rail links – the common thread is that Nepal’s heavy dependence on India must be whittled down.

China may make the enterprise profitable for itself in business or commercial terms but the political objective will still be to bring about a new strategic balance whereby Nepal would have the resilience to stand up to Indian “bullying”.

Nepal understands what China is trying to do – not to pit it against India but instead strengthen its capacity to safeguard its sovereignty and stand up to India. That is why Oli called China an “all-weather friend”, invoking for the first time a loaded expression that is characteristic of the China-Pakistan alliance.

Oli signalled a subtle geopolitical shift. Significantly, Nepal’s army chief Gen. Rajendra Chhetri is going on a week-long trip to China next week no sooner than Oli returns to Kathmandu.

China is unlikely to push the envelope too far too fast and risk a backlash from India. Nepal’s stability and development is very important for Beijing, since it impacts Tibet’s security. But then, China doesn’t have to be in a hurry. Time works in China’s favour.

Below the radar China has also established contacts with the Madhesis, consistent with its approach to cultivate all political constituencies in the country. China’s influence among the power brokers in Nepali politics today is such that it becomes a factor of stability for the uneasy coalition that Oli heads.

Competitive combativeness

To be sure, China has astutely exploited to its advantage the recent tensions in India-Nepal relations but that is only part of the story. But the conclusion becomes unavoidable that the animus that is appearing lately in China’s Nepal policies is a signal of its displeasure over India’s own unfriendly policies toward China during the past one-year period.

A combative edge has appeared in the India’s China policies since the beginning of last year. Delhi has not bothered to maintain the careful balance between competition and cooperation in the relations with China, which the United Progressive Alliance government managed to keep.

There is much greater willingness on the part of the present government to identify with the USA’s rebalancing act in Asia-Pacific, so much so that senior Pentagon officials voice confidence that in a near future the US and India will undertake joint patrols of the disputed South China Sea, in areas over which China claims sovereignty.

Meanwhile, the upgrade of the US-Japan-India trilateral format, the strengthening of India’s military ties with Vietnam, and likelihood of the signing of the ‘foundational agreements’ between the US and India – all these reflect a new openness on the part of India to identify with the US’ containment strategy against China.

No more cooperation

On the other hand, there is no visible interest in Delhi to promote cooperation with China. Trade and investment with China is not a priority for Delhi. India has blindly copied Japan’s negativism toward China’s “One Belt One Road” initiatives instead of testing them or using them as means to stimulate investment and improve connectivity or strengthen regional security and stability.

Simply put, the present government is simply uninterested in exploring the potentials of cooperation with China. However, there is precious little Washington (or Japan) can do to help Delhi if the competition between India and China degenerates into rivalry. Therefore, Nepal becomes a crucial test case where India’s diplomatic skills come under severe challenge.

Interestingly, China has ensured that Nepal was admitted last week as a “Dialogue Partner” of the Shanghai Cooperation Organisation just before India’s formal accession as a full member is complete. A commentary on Oli’s visit in the Chinese communist party tabloid Global Times pointed out that Nepal is “subsumed” by the Indian economy, which has become “a small economy closest to the dominant power in the South Asian economic circle”, whereas the ties between China and Nepal “do not belong to the India-dominated South Asian economic circle”.

Beyond a point, the argument that Nepal is too small a fry for Beijing to antagonise Delhi and jeopardise its stakes in the Indian market does not hold water. The bottom line is that India’s pivot to the South China Sea affects China’s core interests. And China will get the message across to Delhi that such a course is extremely unwise and will not serve India’s vital interests.