China Loses Ground in Nepal

Since the formation of a new government following elections in November, Nepal has witnessed an escalated Chinese engagement on the political front. The post-election coalition saw the Communist Party of Nepal–Unified Marxist Leninist (CPN-UML) and Communist Party of Nepal–Maoist Center, led by K.P. Sharma Oli and Puspa Kamal Dahal respectively, join together to form the government with Dahal as prime minister. China seemed confident about renewing its political space in Nepal, winning back the advantage Beijing enjoyed during the rule of the Nepal Communist Party (NCP), formed by the merger of the CPN-UML and the Maoists, under the leadership of Oli until 2021.

New Chinese envoy Chen Song, since his arrival in January of this year, has been aggressively engaging with Nepal’s political leaders, following in the footsteps of former Ambassador Hou Yanqi. A few recent examples include the Chinese embassy’s announcement of Pokhara International airport as a flagship project under the Belt and Road Initiative (BRI) on the eve of the airport’s inauguration; the arrival of a technical team to undertake the feasibility study of the proposed Trans-Himalayan Railway Network; and an assertive press conference by Chen Song on his arrival on January 8 at the airport. These rapid-fire moves signify Beijing’s desperation to capitalize on the presence of a friendly government under Dahal’s leadership.

The recent upheaval in the political environment in Kathmandu has taken an inimical turn for Beijing. The revival of the pre-election Nepali Congress (NC) and Maoist Center-led five-party coalition has scuttled China’s hopes for an extended period of influence.

The political shake-up in Nepal centered on the March 9 presidential election, with Ram Chandra Poudel, a prominent NC leader (vaguely conferred as “pro-West”), enjoying a clear majority for the win. Poudel benefited from Dahal’s decision to offer his party’s support, blowing up its partnership with the CPN-UML in the process.

Poudel’s victory also overturned China’s attempts to install a “pro-Chinese” communist face in the supreme post. The keen interest of Beijing in Nepal’s presidential candidate stemmed from the past experience of its engagement with Bidhya Devi Bhandari as president, and the comfortable relationship it enjoyed thanks to her discernible proclivity toward China. This was manifested during Bhandari’s participation in a Global Security Initiative (GSI) meeting organized by the Chinese Communist Party (CCP) last September, despite reservations from the Ministry of Foreign Affairs. Participation in the GSI forum, touting a new security initiative put forward by China, infringes Nepal’s policy of non-alignment toward any security, military, and strategic alliances. Nepal has steadfastly refused to participate in the U.S.-led Indo-Pacific Strategy and avoided the BIMSTEC joint military drill in 2018.

The understanding among the new post-election coalition that Dahal will continue as prime minister for the first two years will still be perceived by China as an opening to deepen its engagements with Nepal. Nonetheless, Dahal will have a hard time freely managing international relations, given the ideological polarity within the coalition parties and their implications toward different geopolitical actors. The Nepali Congress has long been seen as more friendly toward India, and it famously threw its weight behind a controversial infrastructure deal with the United States under the previous government.

Even Dahal himself is perceived to be less inclined toward Beijing as compared to Oli, and is attempting to maintain equidistance among the geopolitical powers.

Amid these developments, Beijing is in no mood to give up its foothold in Nepal’s political sphere. Although China viewed a deepening relationship with Nepal’s communist bloc as strategically advantageous in intensifying its presence in Nepal, it has also made shallow attempts to strengthen its association with other political parties, particularly the Nepali Congress.

During a four-day visit to Nepal in July 2022, Liu Jianchao, the head of the CCP’s International Liaison Department, spoke of the CCP’s desire to improve ties with the NC. He further expressed the CCP’s readiness to build up strategic communication with the NC to foster inter-party relations through exchanges, mutual learning, and beneficial cooperation.

This realization by Beijing that it must broaden its political engagement beyond the communist parties of Nepal came after the NCP broke apart. China had invested heavily in the merger of the two largest communist parties to establish a strong communist force in Nepal. The split of the short-lived unity party in March 2021 was a major setback to Beijing’s Nepal policy. The NCP split into three factions, with the revival of the former CPN-UML headed by Oli and the CPN-Maoist Center led by Dahal, as well as a new party – the CPN (Unified Socialist) – headed by Madhav Kumar Nepal as a splinter group from the CPN-UML.

Former Chinese envoy Hou Yanqi made vigorous attempts to reunite the splinter parties, but to no avail. To make things worse, the failure of its attempts to form an electoral alliance among the communist parties before the November 2022 general elections left Beijing in a scary position.

Now, Beijing’s immediate approach would be to engage with any political forces in the ruling alliance in Kathmandu to consummate its larger strategic interests. Although China will try to find an opening through Dahal, as both the current prime minister and the king-maker in the Parliament for the upcoming five-year period, an expansion of the relationship with Nepali Congress – which emerged as the largest party in the November 2022 poll – will remain Beijing’s priority.

China’s Nepal policy will continue to remain guided by its traditional security issues linked with Tibet and Tibetan communities in exile in Nepal, and Nepal’s adherence to the One China policy. China is expected to increase its soft diplomatic tactics, with an increased emphasis on Buddhist heritages across the northern bordering districts of Nepal, and in Lumbini, the birthplace of Siddhartha Gautam as a pivot of Buddhist diplomacy to realize its overarching aim of co-opting Buddhism across South Asia and Southeast Asia. This also fits into Beijing’s larger strategy of seeking to persuade Nepal to recognize the legitimacy of a future successor to the Dalai Lama as chosen by Chinese authorities.