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"On my part, I remain committed to the process of dialogue. It is my firm belief that dialogue and a willingness to look with honesty and clarity at the reality of Tibet can lead us to a viable solution."

Report: China's Tibet's Backyard

March 11, 2010

TibetInfoNet (TIN)
ISSN: 1864-1407
March 9, 2010

The arrest of Thinley Gyatso, the de-facto
representative of the Dalai Lama in Nepal, which
was reported by IANS on 7 March 2010, as well as
the arrest of several groups of Tibetans who
entered the country clandestinely earlier in the
year, bear witness to the People's Republic of
China's (PRC) increasing efforts to exert
influence in Nepal. This Special Report provides
the context to these developments by highlighting
the current state of the Sino-Nepali rapport for
which the long border that Nepal shares with the
Tibet Autonomous Region (TAR) is a defining
element. As a whole, Nepal, one of the poorest
countries in the world, is the net loser in a
deeply asymmetric relationship. It has vulnerable
border regions where China is currently actively
establishing its presence, and its trade balance
with China is hopelessly skewed. Chinese
development efforts in Nepal appear to serve less
Nepali needs than the PRC's vested interests, in
particular the development of the TAR as a bridge
to South Asia. The benefits of Chinese investment
in Nepal have yet to be felt and interaction,
though superficially cordial, is often uneasy,
mainly because China's presence in Nepal is
marked more by determination than skill. Still,
the prospect of benefiting from China's economic
boom and diminishing the almost total and often
resented dependence on India, has fostered a
willingness to cooperate with China, in
particular among Nepali elites. Concessions
relating to the Tibet issue are one of the few
cards they have at their disposal. Nepal however
is in a dilemma, since despite speculation about
its future, it is still far more dependent on
help from India and developed countries who
insist on Nepal's adherence to international
agreements on refugees. The way ahead will
therefore depend on how much determination,
skills and energy these international partners
will be ready to invest into facing China's advance in Nepal.(1)

Tedious border

Seven counties of the Tibet Autonomous Region
(TAR)(2) border 14 districts of Nepal.(3) Closely
linked to Tibet by history, language and culture,
most people in these high-mountain, sparsely
populated districts are followers of Tibetan
Buddhism. In the past, trade and cultural
relationships across more than 60 mountain passes
were prolific, but they were dealt a devastating
blow by the advent of Chinese rule in Tibet.
Nepal is one of the few of its 15 neighbours with
whom the PRC has never had any serious disputes,
and in principle, all issues related to the
common border were settled by the 1960s. A trade
agreement was signed in 1968, in theory allowing
barter trade for locals from both sides living
close to the border, and by 1973 a Nepal
Trans-Himalayan Association had been formed.
Regular trade with Tibet was later agreed via
three trade points, although to date only the
Tatopani -- Zhangmu (Khasa) -- route(4) is actually functioning.

In practice, however, the terms, validity and
extent of the many agreements that exist on paper
are reliant on how the Chinese side wish to
implement them. The acute imbalance between the
two countries is nowhere more apparent than in
the way many border issues are handled at the
exclusive discretion of the local Chinese
authorities. It is rarely possible to clearly
discern the extent to which local authorities act
on their own, on behalf of, or with consent of
the PRC government. The accord, for example, that
allows locals settled within a range of 30km on
both sides of the border to circulate more or
less freely and practice barter trade, is
sometimes implemented, but sometimes not.
Generally it seems easier for local Nepalese to
cross over into Tibet, than the other way
round.(5) But there are also reports of Nepali
locals in the far west regions being jailed as
border trespassers and charged 5,000 Yuan
(UK£483; US$732; EUR€537), a very high sum in
Nepal, often for simply trying to catch escaped
cattle. Some local Nepalese district offices
tried to regulate the situation by introducing
local identification documents, but ultimately
the decision whether and when the border is open
and for whom remains the prerogative of the
Chinese side. An arrangement to waive visa fees
for Chinese citizens for a period of up to three
days in exchange for the same conditions for
Nepalese visiting China was revoked as the
Chinese authorities did not reciprocate.

Although things are superficially more settled at
the Tatopani-Zhangmu border point, where most
tourists cross and intensive trade activities
take place, there is also a great deal of
arbitrariness and imbalance here too. Many
Nepalese who travel across the border on a day
permit to purchase cheap manufactured products in
Zhangmu's shops, a popular excursion even from
80km away in Kathmandu, face rudeness and
apparently random implementation of regulations.
An example of this is the way Chinese border
guards vary the opening times of the border gate.
Nepali businessmen also complain about
harassment. Foreigners, who cross the border are
treated with more respect, but those found
hanging around on the Nepali side are often
accosted by what seem to be Nepali onlookers
attempting to intimidate them, for instance, when
they take photos of the bridge across the border,
although this as such is not forbidden.

Whereas Nepali border guards do not cross into
Tibet unless invited to do so, Chinese guards
make frequent appearances on the Nepali side,
mostly in civilian dress but without attempting
to conceal their identity. Chinese personnel were
clearly in evidence during the events of 2008 in
Tibet, apparently as part of an intimidation
strategy targeted at potential troublemakers. The
uninhibited presence of Chinese officers in
Tatopani and their imperious behaviour has led to
a number of incidents. The most serious occurred
in July 2006 when a car belonging to a Chinese
official hit and seriously hurt two Nepalese.
Police at the customs checkpoint were reluctant
to take any action against the driver of the
vehicle involved and released him after
consultations with Chinese officials. Angry
locals therefore stormed the checkpoint,
demanding action against the driver. A panicking
Nepali policeman then opened fire, killing a
local resident and triggering further protests,
leaving dozens of trucks stranded at the border.

Nepal and China signed a first protocol agreeing
boundary maps in 1962 and a second one in 1978.
Although both countries had agreed to review the
maps every 10 years, they have not done since
1988. In June 2009, following complaints of
border encroachment at Kimathanka, Sankhuwasabha
district, in Eastern Nepal, Nepali officials
conducted an inspection for the first time in the
region in 40 years, but their Chinese
counterparts barred the team from reaching
Dendang, saying that they needed higher-level authorisation to let them in.

Nepal's road network in mountainous areas is
largely underdeveloped. During summer 2005,
Nepal's Maoist insurgency(6) had massively
disrupted traffic in remote areas adjacent to the
Tibetan border and northern districts like Jumla
and Humla faced a scarcity of food and essential
goods. An agreement with Beijing signed in summer
2004, allowed for supplies to be taken through
the Tatopani-Zhangmu border post, across Tibet
and from there back to Nepal's northern
districts. In August 2006 however, following the
re-installation of democracy, bilateral relations
reached a low point and Chinese authorities
temporarily withdrew from the agreement, arguing
that trucks could hide Tibetans clandestinely
crossing to Nepal. This had the effect of
exacerbating the transport shortage problem.

 From March 2008, access to Mustang by the UN's
World Food Programme (WFP) was again hindered by
Chinese restrictions following rising tensions in
Tibet. A severe drought in the northern district
made the problem worse. A similar situation was
reported in Taplejung, Sankhuwasabha, and Gorkha
districts. Some border checkpoints re-opened on
10 July to ease the food shortage, but they were
closed within three days in order to check for
alleged infiltration into Tibet before and during
the Beijing Olympics. In April 2009, Qiangba
Puncog, then chairman of the TAR government
(governor), meeting the Nepali Foreign Minister
in Lhasa, announced that the TAR would provide
annual aid worth three million Yuan (UK£297,000;
US$441,000; EUR€330,000) to northern Nepal for
five years commencing in 2009. "The economic
development of northern Nepal is relatively
backward due to inconvenient transportation. We
will offer grain and basic commodities to Nepal
after further negotiations with [the] Nepali
government", he said. In effect, Kathmandu is
placing a crucial function of the Nepali
government in the hands of the Chinese
authorities and making them dependent on their
good will. The Chinese presence in the border
region is politically flanked by the development
of the Nepal China Himalayan Friendship Society
(NCHFS). The NCHFS, headed by a former Nepali MP,
Ananda Prasad Pokharel, is currently expanding
its network to all districts of Nepal along the Tibetan border.

On 15-16 August 2009, officials from Nepal and
China met in Lhasa to discuss current border
issues. The agenda reflected the different
perceptions of what the border problems are and
each side's expectations. Both agreed that border
trade needed regulation and cross-border crime
had to be tackled, but definitions of these
issues were at variance. Next to better access to
remote regions via Tibetan roads, Nepal's
concerns were mainly smuggling, including
wildlife products, and manufactured goods which
escape the scope of Nepal's tax offices, but also
Chinese-made weapons and fake currency as, again
and again, these emerge in Nepal.(7) The Chinese
side focused more on what both sides have agreed
to call "illegal immigration from Tibet" or
"human trafficking" - terms coined by China to
refer to Tibetans clandestinely crossing the
border to meet the Dalai Lama. As in a previous
meeting in February, the Chinese side raised the
issue of a future extradition treaty with Nepal.
This divergence on agenda priorities might also
explain why China in February had proposed
setting up a high-level mechanism to look after
border security and management, while Nepal
favoured a local mechanism in the districts
bordering the two countries. The issue of border
control was further discussed during various
Nepal-China meetings since then, in particular
during Nepal's Prime Minister's visit to China in
December 2009 as well as that of Home Minister Rawal in February 2010.

The current stage of these discussions is
unclear. Nepal's press announced that the groups
of Tibetans who were en route to India to meet
the Dalai Lama, a purpose for which they would be
unable to obtain legal documents from the Chinese
authorities,(8) and were arrested in Nepal in
early 2010 might be handed over to the Chinese
authorities, but they were eventually placed in
the hands of the UNHCR in Kathmandu. Nepal is in
a difficult position in this matter since it is
being pressured by China to effectively support
their border forces in policing the frontier, but
also by international donors, upon whom it
financially depends on, to adhere to
international agreements on refugees. Bizarrely,
the result of this impasse thus far is that
China's attempts to gloss over the embarrassing
border-crossing issue by pressurising Nepal
towards greater toughness on its behalf has
highlighted the problem internationally. In any
case, with 700 arrivals until October 2009, the
number of Tibetans willing to cross the border
has been picking up again after a decade low of
just 450 in 2008, as the border, following the
protests in Tibet, was almost hermetically
closed. Nowadays the refugees prefer the route
that takes them through the region around
Tatopani/Zhangmu, but some occasionally use the
west route through Nepal's Humla and Mustang
districts. Even Tibetans coming out via Bhutan
must first make their way through the Nepali
capital before they can proceed to India, because
the UNHCR office responsible for Tibetans is in
Kathmandu. In a new development, some Tibetans,
mainly those better educated and financially more
independent manage to obtain visas for India from
the Chinese mainland and come legally by flying
from Beijing or Chengdu, bypassing Nepal altogether.

The increase by 50% of the PRC's annual aid
allowance to Nepal during 2009 made international
headlines. Seen in context however, the impact of
the gesture is limited and does not fit well with
the PRC's reputation for delivering aid with no
strings attached. The route to the increase was
long and complex. It appears to have been first
considered in 2005 when the Chinese authorities
were keen to support the king who had seized
power and Nepal was internationally isolated. But
it was only in July 2006, as Beijing unexpectedly
faced a resentful civilian government in
Kathmandu, and efforts were made to regain ground
lost because of this political blunder, that the
increase was "discussed" by Chinese Vice-Minister
for Foreign Affairs, Wu Taiwei during a visit to
Nepal. Discussions progressed when Nepal's then
Foreign Minister Upendra Yadav's visited China in
2008. At the time, Beijing complained that the
Nepali government was not doing enough to control
Tibetan protests in Kathmandu, while at the same
time began offering further incentives. The
increase, to 150 million Yuan (UK£14.5m; US$22m;
EUR€16m), might appear spectacular, and it was
certainly meant to, but relative to the very
large amounts of aid Nepal receives
internationally it is not that substantial.
Although a close neighbour of Nepal, the new aid
package provided by China amounts to only about
two-thirds of that provided by Denmark, for
instance, or half of what Germany donates, a
quarter of what the World Bank gives and it is
US$5 million short of the UK aid agency DIFID's
budget for Nepal.(9) In addition, it remains to
be seen how much of a free hand Nepal will be
given to spend the Chinese funds.

China also has a role in Nepal's infrastructure
development. No prospect has fired Nepalese
imaginations more than that of connecting to the
PRC's railway and pipeline networks, and
statements by Chinese diplomats have been a
balancing act between fuelling such hopes, while
remaining non-binding in nature. The life
sustaining provision of oil from India, currently
Nepal's only supplier, is subject to regular and
paralysing shortages, making the prospect of
lessening Nepal's dependence on its southern
neighbour, through an extension to Zhangmu of the
over 1000km oil pipeline between Golmud and Lhasa
particularly seductive. On 14 January 2009,
China's then ambassador to Nepal, Cheng Xia Ling,
claimed in response to the Nepali demands that
China was "working towards developing a permanent
and long term mechanism to supply petrol to Nepal
from China".(10) Considering the technological
challenges involved, the establishment of a
pipeline across south Tibet to supply Nepal would
mean a huge investment that would be unlikely to
provide any returns for the foreseeable future.
Besides, the real issue is not India's
unwillingness to provide petrol, but that
cash-starved Nepal is often not in a position to
pay for it, a problem that would be no different if China was a provider.

Since the opening of the Golmud-Lhasa railway in
July 2006, Nepal has been enthusiastically
pressing for its extension to the Nepal-Tibet
border. Even one year before the railway reached
Lhasa, Nepali government representatives were
already taking any opportunity to lobby TAR and
Beijing officials for some firm commitment. A
leading economic journal in Nepal wrote: "Once
the 770km Lhasa-Khasa railway (...) comes into
operation, Nepal (...) can materialise its plan
to re-establish itself as a transit point between
India and China; such a situation will have far
reaching economic benefits".(11) Chinese
representatives fed this hope. On 14 January
2008, the Chinese ambassador, Cheng Xia Ling,
declared: "The China-Tibet railway link will not
end in Lhasa, as we have plans to expand it up to
the Nepalese border". In April of the same year,
Ai Ping, director general of China's
international department, and then Nepali Prime
Minister G. P. Koirala were said to have
"discussed the benefits of the project" and
Nepali officials reported that the railway link
would be in place within five years. However, on
19 August 2008, when Wang Yongping, spokesperson
for the Ministry of Railways, announced that six
new railway lines were planned on the Tibetan
Plateau, he conceded that his ministry has no
plans at present to extend the network to Nepal.
In fact, at the beginning of 2010, reports in the
Chinese press made it clear that even the
Lhasa-Shigatse line is still awaiting Beiing's go ahead.(12)

Since the 1960s, the PRC has undertaken several
road construction projects in Nepal. These are
officially declared to be development aid but in
contrast to comparable projects run by other
nations in Nepal, they are targeted less at
providing much-needed Nepalese
inner-connectivity, and more at establishing
strong links between Nepal and Tibet/China, and
ultimately India. The first such road project was
between Kathmandu-Tatopani/Zhangmu, also known as
the Friendship Highway, or Arniko Highway.(13)

A second road, long planned but only given
serious consideration in the 1990s and not
formally agreed until 2001, will cross Rasuwa
district and join the main traditional trade
route through Kyirong(14) and China's G219
highway on the Tibetan side. The advantage of
this route is that it runs through comparatively
smooth and broader terrain, allowing for much
higher transport capacities and easy
extension.(15) The road is expected to be
completed by mid-2011, and will allow for a
faster access to Kathmandu from the border. More
importantly, it will also offer the option of
bypassing the bottleneck that is the Kathmandu
valley and provide Chinese goods a quick axis to
the incomparably larger markets of India (less
than 150 kilometres as the crow flies, and on
smooth terrain). Once this road is in operation,
Nepal could become simply a transit zone in the
very same way that Tibet is used(16) for the
transit of goods from Mainland China to Nepal. It
is likely that, as in Tibet, some meagre benefits
from the transit might trickle down to locals,
but the traders at both ends of the chain will make the real profits.

The new Rasuwa Road will allow for a fast link between Kyirong, TAR, and...

A third axis is being planned for the Bajhang,
Humla and Darchula districts in the far western
part of Nepal that would connect the town of
Simikot with western Tibet. Annual trade fairs
used to be held on the Tibetan side of the border
until 1959, but since then the region has been,
like many other parts of the border, a desolate
dead end. It would probably remain so if it were
not for Mount Kailash just over the border in
Tibet, attracting tourists and pilgrims;
thousands of Indians visit the holy site each
year. So far, they have to be flown in or travel
via Kathmandu and Tatopani, so that costs and
hardships involved considerably reduce the
potential of the region. Unsurprisingly, it is
Ngari prefecture, where Mount Kailash is situated
that is particularly pushing this project.

Trade imbalance and patchy investment

The real volume of the trade between Nepal and
China is a matter of great confusion. Statistics
published by both countries do not contribute to
clarity, as they are calculated according to
different time spans and apparently different US
dollar rates. Most observers estimate that
exchanges are not fully officially recorded and
hence partly illegal. Finally, there are reports
that vested interests by companies involved in
the trade lead to distortions of already
imprecise Nepali statistics. What appears certain
is that a large amount of the trade between the
two countries, probably more than 70%, is by
road, i.e. via the TAR for which Nepal is by far
the biggest foreign trade partner. It is also
certain that Nepali exports to the TAR and China
make up a negligible share of the volume of
trade. They have been in decline compared with
imports into Nepal by a rate of possibly 219%
between 2003 and 2008. This is even though Nepal
could markedly raise its exports to China after
reaching a historic low around 2006-7.(17)
According to Nepali officials, the trade deficit
between Nepal and China was about NRs.21.5
billion (UK£196m; US$295m; EUR216m) in 2008-9 and
China is Nepal's second major trading partner for
imports, albeit far behind India, but ranked at
11th position in terms of exports.

In the last decade, Nepal's markets have been
flooded by Chinese manufactured goods, mostly
relatively cheap and of poor quality. While this
has allowed poorer Nepalese access to products
previously beyond their means, it also cripples
the development of local manufacturing that could
be a key to Nepal's development. Many of these
imports are outdated or often substandard
merchandise that could not be sold in China or
exported to other countries. There are also
pirated goods from big companies produced in
lowland China and which are brought across the
Tibetan plateau to Nepal. Typically, Nepali
traders make contracts with Chinese or Chinese
Muslim (Hui) traders who bring the products
across Tibet. They rarely if ever go through
Tibetan hands, and hence do not benefit local
people. The products are then brought by Nepali
traders across the border via Tatopani-Zhangmu and sold in Nepal.

Disputes between Nepali traders and Chinese
custom officials are frequent. Chinese customs
might impose additional administrative
restrictions, even after any duty as been paid.
These restrictions are often far from transparent
and if not arbitrary, certainly appear so.
Meanwhile, on the other side of the border,
Nepalese customs complain that bills, invoices
and other documents required to calculate duties
on imports are often incomplete or unrealistic.

As far as the export of Nepali goods into the TAR
and China is concerned, Nepali businessmen and
customs officers complain about numerous business
practices which they label as protectionist and
unfair, including increasingly high duties and
the prevalence of non-tariff barriers like
procedural delays, product disqualification and
the Chinese quarantine system. The
Trans-Himalayan Association reports that Nepal
had proposed that the Chinese government should
provide tariff-free treatment to 1500 goods but
it has only granted this status to 300 goods so
far. In July 2009, strong restrictions on the
import of religious handicrafts, mainly statues,
from Nepal into Tibet became effective. Although
no official reasons have been given for the new
policy, it appears that the move by the Chinese
authorities were aimed at placing trans-border
religious links, and possibly the use of
religious funds, under closer scrutiny, while
protecting the local markets from Nepali imports.(18)

Chinese investment into Nepal is fast becoming
very visible in parts of Kathmandu like Thamel
and Jyatha. However, although joint ventures
between Nepali entrepreneurs and Chinese
investors generally work fine, many businesses
run in Nepal by Chinese are amateurish and
short-lived. Chinese entrepreneurs, who operate
in a wholly different environment in China, find
it difficult to adapt to Nepal's arcane and
highly politicised labour practices. Some
disputes have recently made headlines in Nepal.
In July 2009, Hotel Beijing International in
Jyatha, a Chinese-owned establishment, came under
attack from unions for alleged non-implementation
of labour laws. The dispute between the
management and the union snowballed following
interference by Chinese embassy officials.
Trouble broke out when members of the General
Federation of Nepalese Trade Unions (GEFONT)
allegedly physically attacked the owners. The
embassy then made representations to the Prime
Minister, police, party leaders, the Hotel
Association of Nepal and even the International Labour Organisation (ILO).

The rising incidence of similar cases,
particularly in Thamel, Kathmandu's main tourist
area, has led Nepal's government to assure the
Chinese embassy of its commitment to ensuring the
safety and security of Chinese businessmen in the
country. The Prime Minister and the Foreign
minister spoke with the ambassador to this
effect.(19) Similar trouble was reported at
another Chinese-owned establishment, Hotel
Pyramid, a few months before the Hotel Beijing
incident, where two officials from the Chinese
embassy had got involved over the minimum wage dispute."

The Chameliya hydro-electricity project in
Nepal's far west Baitadi district has been beset
with problems. In 2008, there were clashes
between around 100 Chinese workers and 300-350
Nepalese. In a region where Nepal's Maoist
movement was particularly strong and at a time
when their party was the main coalition partner
governing the country, the management sought
political support by involving the
Maoist-affiliated Chameliya Stakeholders Forum in
the project, but to no avail. Tensions reached a
climax during summer 2009. A main contention is
the allegation by Nepali workers that the Chinese
company, which had signed an agreement to pay a
daily wage of NRs. 300 for an eight-hour day,
actually paid only NRs. 200 while expecting up to 12 hours work a day.

Despite such ups and downs involving political
and labour issues, Chinese investment has arrived
in Nepal and there is currently a great deal of
exploring going on. In August 2009, a delegation
led by Li Jiming, Director General of Yunnan's
Department of Commerce was in Nepal to
investigate business opportunities in tourism,
wind power and hydropower, and mineral
extraction. Another delegation, this time from
Sichuan, visited Kathmandu in late 2009. Regular
flights between Kunming, Yunnan's capital, and
Kathmandu have been operating since July
2009.(20) The Kathmandu-Lhasa bus line, which was
originally established by a Nepali state-carrier
in 2005, failed to last longer than a few
journeys due to the frequent refusal of the
Chinese authorities to issue visas to foreigners.
It will be running again shortly, but this time a
Chinese company will be operate the service, thus
highlighting the asymmetry of the relationship.
Chinese tourists from the developed parts of the
PRC are also increasingly to be seen in Nepal.
Although this is a development that is very much
welcomed by Nepal's tourism industry and the
relevant government departments, the growing
stream of Chinese nationals to Nepal is also fast
becoming a headache for the immigration
authorities. Recent reports indicate that
unemployed Chinese reach Nepal on a tourist visa
and stay to work illegally in the country, mainly
for Chinese businesses or Nepali firms doing
business with China. Immigration agents in
Kathmandu are currently under scrutiny for
helping them stay in Nepal or continue their way to India.(21)

For some years, Chinese officials and businesses
have been exploring potential investments in
Ayurveda, the traditional Hindu medical system,
which, like in India, enjoys special state
attention. In Nepal, Traditional Tibetan Medicine
(TTM/Sowa Rigpa) is officially classified as part
of Ayurveda. The transformation of TTM into a
commercial resource is a major focus in the
development plans drafted by the Chinese
authorities for the TAR and other Tibetan
regions. For 2010, the Chinese authorities have
announced a strengthening of this policy.(22)

China seems to be also particularly keen to
participate in the exploitation of natural
resources in Nepal. In the last fiscal year, 14
Chinese companies sought the government
permission to extract alluvial gold, copper and
natural gas. These companies have pledged
investment of some NRs500 million (UK£4.5m;
US$6.8m; EUR€5m). Of the total number of Chinese
companies that expressed interest in investing in
the mining sector during the fiscal year 2008-9,
11 were involved in extraction of alluvial gold.
Other Chinese companies are eyeing Nepal's
natural gas deposits and have also pledged investment in copper extraction.

Chinese investors are particularly interested in
Nepal's hydropower potential, estimated in MWH
per capita as amongst the highest in the world.
China is said to have pledged investment, mostly
in the form of loans, of over US$500 million for
four hydroelectric projects. This new interest in
Nepal's still nascent commercial electricity
production might reflect a Chinese intention to
prevent India, which has been involved in the
sector for many years, from securing for itself
the lucrative projects. But it also fits in with
Beijing's plans for the TAR, in particular the
development of energy-intensive mining projects.(23)

China appears to be developing a broad web of
institutions in Nepal that will flank and
stabilise its current, twin programme of
political influence and investment efforts. The
recent establishment of a Nepal-China Media Forum
is an example of this endeavour; the Nepal China
Himalayan Friendship Society (NCHFS) in border
regions has already been mentioned. Other
organisations, like the China Information Center,
Nepal China Executive Council, China Study Center
and Nepal-China Investment Promotion Center, are
already in place. The Chinese embassy in
Kathmandu has also provided financial assistance
to run Chinese language classes in Kathmandu
University as well as several Confucius
Institutes. Additionally, in 2008, the Chinese
embassy took two Supreme Court officials to
Beijing for training in information technology,
and Chinese authorities have expressed interest
in providing scholarship to judges and officers.
According to, the first
scholarship to a Nepalese civilian officer was
granted to Jaya Mukunda Khanal, a high District
Officer in Kathmandu who is said to have played a
significant role in curbing the Tibetan protests of 2008.


Despite continuing problems in border management,
the astronomical trade imbalance between the two
countries and the, so far, patchy outcome of
Chinese investment in Nepal, the attitude of the
Nepali establishment towards China is generally
optimistic. This appears to be due to a firm
determination to benefit from China's economic
rise in order to escape Nepal's extreme
underdevelopment, but also its almost total
dependency on India, with which Nepal shares
close cultural ties, but also a problematic
political relationship.(24) With a relatively
small market and no natural resources comparable
to, for instance, those of Mongolia, Nepal has in
fact not much to offer to China.(25) This is
often compensated by a pre-emptive eagerness to
acknowledge Chinese expectations on the 'One
China' policy.(26) As a result, Nepal's elites
make painstaking efforts to match Chinese stances
on Tibet with which it shares, next to geography,
centuries of trans-Himalayan relations. Even
though the relationship between Nepal and Tibet
rarely, if ever had anything to do with China, it
is currently being presented in Nepal in, at
times, a bizarre fashion. For example, while
opening an event jointly organised in Kathmandu
in December 2007 by the China Association for
Preservation and Development of Tibetan Culture
(CAPDTC) and the Nepal Arniko Society(27) (NAS)
("Boosting the friendly exchanges between China
and Nepal and promoting the preservation and
development of Tibetan culture"). NAS's
president, Harish Chandra Shah, said: "The
profound and rich Tibetan culture has a long
history, constituting a part and parcel of the
Chinese culture and enriching the treasure house
of diversified cultures of the world". An article
published in 2008 in the economics magazine
'Via-Able', argues that the history of
Nepal-Tibet trade relations can be traced back as
early as the 4th century A.D, "even before the
onset of Sino-Nepal relations". The article goes
on to suggest that "50 to 60 years ago" Tibetans
practiced subsistence agriculture on the basis of
"slash-and-burn cultivation", and that "religious
and humbled Tibetans" in a "once impoverished
Tibet" are now "aggressively (...) involving
[sic] in lucrative economic activities". "Tibetan
watermelons", allegedly grown on once "almost
deserted fields [turned] into arable land", are
provided as an example of the alleged new
dynamism, ignoring the fact that watermelons on
sale in Tibet are brought there from Xinjiang or
Gansu by the dominant Chinese Muslim (Hui) business community.

1: This is the second installment in a series of
Updates and Special Reports in which TibetInfoNet
explores China's policies towards Nepal and their relevance for Tibet.
2: Dingkye (Chin: Dingjie), Dingri, Nyalam (Chin:
Nielamu), Kyirong (Chin: Jilong), Saga, Drongpa
(Chin: Zhongba), and Purang (Chin: Pulan).
3: Taplejung, Sankhuwasabha, Solukhumbu. Dolkha,
Sindhupalchok, Rasuwa, Gorkha, Manang, Mustang,
Dolpa, Mugu, Humla, Bajhang and Dharchula.
4: Tatopani is the last village on the Nepali
side of the border. Zhangmu - known in Tibetan as
Dram and in Nepali as Khasa - is the first
Tibetan town. It is situated a few kilometres
behind the Bhote Kosi (Tibet River) which marks
the actual border and can be crossed by the
'Friendship Bridge' constructed by the PRC in the 1960s.
5: Whereby, for geographical reasons, settlements
tend to be further away from the border in Tibet than on the Nepali side.
6: Despite their name, Nepal's Maoist were rather
an embarrassment for China, who in statements as
in facts unambiguously sided with the
conservative establishment around the King and the army.
7: Recent reports also indicate that cross-border
syndicate are increasingly using Zhangmu as a hub
for their activities. Motorcycles stolen in the
Kathmandu valley for instance are brought across
the border where they are resold at discount
rates to Nepalis who cross the border to go
shopping. Some of the stolen vehicles may be back
in Nepal within a few days, albeit in the hands of new owners.
8: To help understand the reasons why Tibetans
cross the Nepal-Tibet border clandestinely, see:
Border shootings and travel restrictions
( and "If
I have to die on the way, then so be it"
9: The figures include only direct aid to the
government as of 2008 (source: Nepal government).
10: Note that, with nearly 40% of its oil coming
from overseas, a figure certain to grow in the
future, China is itself a net importer of oil.
11: A reader's comment by a Nepalese PhD student
at Peking University, and a member of the China
Study Centre in Kathmandu, posted in the
newspaper Republica on 14 August 2009 reflects
Nepali enthusiasm in the matter when it
speculates: "Once this railway arrives at the
Nepal-China border, does Nepal intend to plug
into it at a single point or will this railway in
future traverse Nepal at multiple points from north to south?".
12: See: More of the same, 19 January 2010
13: Arniko, an outstanding architect of the 13th
century from the Newar ethnic group in Kathmandu,
was invited to Tibet by Phagpa Lama and later
recommended by him to his religious disciple, the
Mongol Kublai Khan, grandson of Genghis Khan and
ruler over China, deemed in Chinese
historiography as founder of the Yuan dynasty.
Arniko conducted major projects in the Mongol
empire and spent the rest of his life at Kublai's
court in Beijing, never returning to Kathmandu.
His name is often used today in connection with
diverse ventures between China and Nepal.
14: Known in Nepal as Kerung or Chilun.
15: It appears that the decision to open the
Zhangmu route in the 1960s was due to the then
priority of keeping the distance as short as
possible. Consideration for the handling of
modern container trucks would naturally not have played a role.
16: See below.
17: This increase in Nepali exports to China is
probably due to the cessation of Nepal's Maoist
insurgency at that time and the subsequent growth in production.
18: See: Restrictions on the import of religious
items from Nepal (
19: Although keen to reassure observers that they
do not intend to interfere in Nepal's internal
affairs, and will abide by Nepali laws, China's
diplomats in Kathmandu address Nepali
institutions in a manner that hardly fits
diplomatic conventions wherever they see Chinese
interests affected. They also exert pressure
through Chinese businesses in Nepal. has uncovered that a Chinese
company offered work to a Nepali lawyer retained
by an NGO working for Tibetan refugees under
condition that he would stop defending that NGO
for the closure of which the Chinese embassy was
pressurising the Supreme Court. Chinese embassy
staff also sent letters to police chiefs in
Kathmandu and Bhaktapur praising them for thwarting Tibetan protests in 2008.
20: The recently drafted policy to accelerate the
construction of airports in the TAR and rapidly
open the region to air traffic with South Asia
will probably mean an increase in flights in the foreseeable future.
21: In India, the problem of illegal Chinese
economic migrants has been looming since the global crisis of 2008.
22: See: 'More of the same', 19 January 2010
23: Although Tibet is regarded as 'Asia's water
tower', in the short term, hydro-electricity
production in the TAR faces challenges. Rivers
there are very sandy and relatively shallow, and
they also carry enormous seasonal fluctuations in
terms of water volumes, conditions that render
the construction of traditional dams difficult in many places.
24: A slogan often repeated in one version or
other in Nepal is to 'correctly manage the
Nepal-India-China triangle' in order to create a
hypothetical 'equidistant' relationship between the two Asian giants.
25: This is perhaps best reflected in a candid
statement made by Nepal's former Foreign Minister
Chakra Bastola according to whom "it is not clear
to what extent and what purpose China is interested in Nepal".
26: Official statistics for instance mostly list
Hong Kong, Macau and even Taiwan under the letter
C, following the entry 'China (P. R.)', whereby
they qualify the two former territories as
"Autonomous region of China P.R." and Taiwan,
even when placed under T is labelled "Taiwan (China P.R.)".
27: See footnote 13.
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