What’s the Status of the Much-Discussed China-Nepal Railway?

Six years after the project burst into the public discourse, little concrete progress has been made.

Chinese President Xi Jinping, center right shakes hands with Nepal’s then-Prime Minister K.P. Sharma Oli as he bids farewell, wrapping up his two-day visit to Nepal in Kathmandu, Nepal, Sunday, Oct. 13, 2019.

The story starts in December 1975, during the trip to China of U.S. President Gerald Ford.

As first reported in the BBC, Ford and his secretary of state, Henry Kissinger, were talking to Deng Xiaoping, the vice premier of China. With his trip coming shortly after India’s annexation of the Kingdom of Sikkim, Ford asked Deng if India would now look to invade Nepal.

Assuring the American duo that China is doing all it can to prevent such an eventuality, Deng added, “…but what we can do is quite limited. Perhaps things will get better when our railroad into Tibet is accomplished.”

China seems to have understood the strategic value of a trans-border railway to Nepal, by way of Tibet, even back then. But the idea of that extended Chinese rail-line was put on hold until China was better equipped to take up such an ambitious enterprise.

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That seems to have been the Chinese calculation, at least. But the trans-border railway entered public debate in Nepal only in 2016 when Nepali Prime Minister K.P. Oli visited China to sign the historic Trade and Transit Treaty.

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There was no agreement on a cross-border railway at the time. Yet the historic 2016 treaty did allow Nepal to use Chinese territory for third-country trade. India had at the time blockaded Nepal – for the third time – when Kathmandu refused to heed Indian concerns over the new charter the land-locked country was drafting. The treaty with China, Nepalis were made to believe, would be a guarantee against another blockade from their fickle southern neighbor.

Of course, a trade and transit agreement is of little use unless there is infrastructure to actually transport Nepali goods to China and beyond.

When Oli again visited China in 2018 after being re-elected prime minister, the two sides hammered out an MOU on “Cooperation for Railway Connectivity” under China’s Belt and Road Initiative.

The next stop in the China-Nepal railway plan was Chinese President Xi Jinping’s 2019 visit to Nepal, when there was yet another agreement on a feasibility study, “which will lay an important foundation to launching the construction of the Cross-Border Railway.”

It was during this trip that Xi also promised to transform Nepal “from a land-locked country to a land-linked country.”

But, again, there was little progress. The COVID-19 pandemic played spoilsport as bilateral engagements came to a near-halt. Another cause for the delay was a change of guard in Kathmandu in May 2021 when Nepal’s Supreme Court effectively booted Oli out of power and installed Sher Bahadur Deuba of the Nepali Congress in his place.

While the Oli-led Nepal Communist Party, which had come into being partly at China’s behest, was openly Sinophilic, the new prime minister from a different party chose to inch closer to the West and India.

Deuba let it be known that Nepal was not interested in building the railway with Chinese loans – but he was game if China was prepared to fund the project through grants.

The Deuba government also successfully pushed the American MCC compact through the Nepali parliament, much to the chagrin of China, which saw the agreement as a part of the U.S. Indo-Pacific Strategy intended to curb China’s rise.

Chinese Foreign Minister Wang Yi then rushed to Nepal to feel Deuba’s pulse at the end of March 2022. China agreed to help with a “technical study” of the railway.

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That is where things stand today.

Kathmandu to Czechia, Via China

Whether one supports the project or not, extending the Golmud-Lhasa-Shigatse railway into Nepal will not be easy, under any government. There are still doubts over its technical feasibility, its ability to carefully navigate the fragile ecology and rugged terrains of the Himalayas, and its huge cost (around $5 billion).

Rupak Sapkota, ex-deputy director at the Institute of Foreign Affairs under Nepal’s foreign ministry and a China hand, refuses to believe there has been no progress on the railway. The pre-feasibility study has been completed, he pointed out, and the feasibility study Xi outlined in his 2019 Nepal visit could soon be underway.

But will the Chinese build the rail line using grants? It is not that they cannot do so, Sapkota said of the railway, 90 percent of which will be bridges and tunnels. “But they worry about the precedent it will set in their dealings with other infrastructure-hungry countries in the region,” he added.

This is only one part of the calculation, however. Beijing could still agree to a railway deal favorable to Nepal, considering the project’s strategic value as China’s “gateway into South Asia.”

Sapkota sees Xi’s statement about making Nepal a land-linked country as meaningful. Coming from the Chinese president, it was a loaded statement, “an indication of the strong Chinese commitment to connecting with Nepal,” he said.

Perhaps as a sign of this commitment, in August 2021, China started working on the 70-kilometer stretch that will extend the Golmud-Lhasa-Shigatse railway to Kerung on the China-Nepal border. After its completion, Kathmandu will be just 100 kilometers away.

The railway’s arrival in Kerung will itself be a game-changer, said Nischchal Nath Pandey, director of the Kathmandu-based Center for South Asian Studies think tank. “But what happens when the rail touches the Nepali border? We have to build a station, a customs point. Where is the planning?”

In such a state of chaos, Pandey argued, the idea of extending the railway to Kathmandu is like “trying to run before you learn to walk.”

Nepal’s quarrelsome and unstable politics add yet more questions.

Which is why, according to Lilamani Poudel, Nepal’s former ambassador to China and a strong proponent of the rail project, before asking China to do anything, “Nepali political parties, intelligentsia, and those at the policymaking level need to have a common vision on the China-Nepal railway.”

Poudel is also dismayed by the “defeatist” arguments against the project’s feasibility. No cost is high enough to secure Nepal’s strategic and economic interests, he argued.

“Many say we should simply improve our road networks with China. But transferring goods by roads is not feasible over distances exceeding 400-500 kilometers,” he added.

Poudel sees no alternative to the railways, not just for Nepal to connect with China and to reduce its dependence on blockade-minded India. “Just imagine the day when we can get on-board a train in Kathmandu and get off at any of the important European capitals. That is what the rail-link with China eventually offers us,” he said.

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Get Real

Others reckon such high ambitions are misplaced. Vijay Kant Karna, a geopolitical analyst, does not believe the railway will be built – “not in another 50 years.”

Karna said the China railway idea was always more a political stunt than a national need.

In his view, the erstwhile Communist Party government pushed the railway project to flaunt its “nationalist” credentials in the aftermath of the Indian blockade. The kind of anti-India nationalism Oli championed is a foolproof electoral strategy in Nepal – and it worked. The three sets of elections following Oli’s 2016 China trip saw the Communist coalition in Nepal romp home to a thumping victory.

But with the mighty Nepal Communist Party now split and a government of different persuasion in office in Kathmandu, the geopolitical calculus has been turned on its head.

Moreover, the Chinese have repeatedly hinted that they are not interested in building the railway on grants and that Nepal may not be able to afford a loan deal.

What both Nepal and China want is a rail link connecting India and China via Nepal. Successive Nepali governments have vowed to turn the country into a “vibrant economic bridge” between these Asian giants.

But Karna said there are few supporters of the China-Nepal-India railway in India – and in light of recent China-India tensions, New Delhi is more hostile to the idea than ever before.

The Nepali bureaucracy’s mishandling of the project also puts a big question mark over its viability.

Aman Chitrakar, spokesperson for Nepal’s Department of Railways, the responsible line agency, rues the lack of coordination between national agencies on the China railway.

At the end of March 2022, Chinese Foreign Minister Wang Yi signed an agreement on the railway’s technical study with Nepal’s Ministry of Finance. “The railway department to this day remains unaware of what was actually agreed that day. The finance ministry has kept us in the dark,” Chitrakar said.

Asked about how long the project could take once work starts, Chitrakar refused to answer the hypothetical question. “What we have advised the government,” he said, “is not to jump into a project of such cost and scale in haste.”

Elephant on Board?

Bhaskar Koirala, a keen China watcher, came back to the question of the railway’s strategic importance for China. He acknowledged that China is reluctant on a grant deal, but “if it sees the railway as a means to project its power in the region, the question of whether it will be built on loan or grant will be a distant-second concern.”

The primary concern will be whether the project gains Indian acquiescence. “I don’t see the Trans-Himalayan railway happening without Indian participation,” Koirala said.

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Such participation is by no means guaranteed. But Sapkota, formerly of the Institute of Foreign Affairs, said China is confident that when the China-Nepal rail is completed, the Indians will see that their concerns over the disturbance of the Himalayan ecology and geology were misplaced. They will thus be more open to the idea of extending the line to India.

At the least, even in the face of their recent hostilities, “the Chinese are confident that Indians will not try to sabotage the China-Nepal railway,” he said. “And once this is built, the dialogue on its further extension can then start.”

If there is broad political consensus in its favor in Kathmandu, Sapkota expects Chinese trains to roll into Kathmandu in as little as a decade.

But strategic calculations aside, are there sizable markets in the rail route to justify such big investments?

Koirala believes that when there is a guarantee that the railway will actually happen, all kinds of new possibilities can emerge. “Markets will certainly follow in the wake of a railway line in such an environmentally rich, biologically diverse Himalayan corridor that the railway will traverse,” he said.

The bigger question for Koirala is whether Nepal has the kind of strong and stable political and administrative mechanisms that will be needed to accommodate and ensure the continuity of such mega-projects.

In any case, 47 years after Deng’s loaded statement on the strategic implications of China’s train penetrating to Tibet, a substantive debate on its merits has only just begun.