Kathmandu: Prime Minister Pushpa Kamal Dahal ‘Prachanda’ is preparing for his visit to China alongside his participation in the Asian Games, which will be held at Hangzhou, People’s Republic of China, from September 23 to October 8, 2023. Despite the exact date of the Prime Minister’s visit to China not being declared by both sides, the concerned ministries are advancing their preparations in parallel with high-level arrangements for the China visit.

China is Nepal’s largest trading partner in comparison to India. According to the statistics of the Fiscal Year 2079-80 from the Ministry of Finance, Nepal’s foreign trade with China has reached NPR 202.3 billion, which is equivalent to about 2 billion US dollars. This foreign trade is significantly larger than Nepal’s total foreign trade with India (12 billion US dollars).

Upon the completion of Prime Minister Prachanda’s visit, discussions will focus on subjects like foreign trade, commercial routes, and infrastructure improvements such as road and rail connectivity. The Ministry of Industry, Commerce, and Supplies has engaged in discussions with China under the auspices of foreign trade in the Industry, Commerce, and Supplies Ministry. The Ministry is also considering establishing a separate branch to exclusively focus on trade with China.

The Prime Minister’s Office and the Ministry of Foreign Affairs have already requested agendas related to trade for upcoming discussions. “For this reason, preliminary discussions are already underway on what kinds of agendas should be raised during the stages of the Prime Minister’s visit to China,” said a ministry employee. “Although initial discussions have begun, the final agenda has not yet been established.”

Expansion of Road Infrastructure for Trade

China has developed cross-border trade routes at two locations, Tatopani and Timure, in Nepal. While Tatopani’s dry port is operational, the construction of Timure’s dry port is in progress. Moreover, the construction of a dry port in Korala, Mustang on the Nepal-Tibet border is also in China’s plan. However, Nepal has insisted on formal proposals for these initiatives to come from the Chinese side.

“China is seeking proposals for the construction of a dry port at Korala in various forums,” stated a ministry officer. “Yet, China has proposed building its own Dry Port Development Project (DPAP) for these initiatives.” On the other hand, the Nepal Intermodal Transport Development Board has already started work on its DPAP with Chinese assistance. If this project is carried out with Chinese support, Nepal’s DPAP project might not progress.

Likewise, China has plans to develop dry ports at Yari and Pulang in the Humla district. However, Nepal’s preparation for these projects is hindered by the poor condition of the road connecting to these ports. Similarly, Nepal is expecting outcomes related to Kimathanka, Olangchunggola, and Timur, which are being raised intermittently, especially considering the lack of Chinese loans and Nepal’s emphasis on grants for road infrastructure development. The issues are raised time and again by the Nepali side but with little progress.

Foreign Trade Road Infrastructure

Currently, the major trade routes between Nepal and China are at Tatopani and Rasuwagadhi. These two routes have delicate road infrastructure on the Nepali side. China desires to improve road infrastructure from Khasa to Tatopani, extending the enhancement up to Barhibise. However, the Nepali side seeks the Ministry of Industry, Commerce, and Supplies’ involvement in this proposal. While the Ministry of Physical Infrastructure seeks to address physical infrastructure issues related to roads, the Ministry of Industry, Commerce, and Supplies remains in charge of examining foreign trade matters. “These road trade routes are crucial to reduce trade costs and time, so we monitor them closely,” shared a source from the ministry. “This is why the Prime Minister’s visit to China could lead to tangible progress in this regard.”

Demand for a Multi-Test Lab

The goods Nepal exports to China must meet Chinese standards. While materials like herbs and other raw products have mostly met these standards so far, Nepal lacks uniform labs for testing various goods that it plans to export. Nepal is preparing to address this issue during the Prime Minister’s visit. “There have been various labs for testing different goods so far,” said a source, “but we intend to establish a multi-test lab this time.” This multi-test lab would encompass all the necessary tests for goods being exported to China. This initiative could simplify the export process for Nepali traders. The Ministry of Foreign Affairs has also received positive feedback from China regarding this matter.

Nepal Unable to Reap Benefits of Trade Concessions

China has granted tariff concessions on more than 8,000 items from Nepal. However, Nepal’s major exports to China mainly include herbal and handicraft products. In contrast, China’s tariff concessions apply to over 8,000 items, which Nepal has not yet capitalized on. “We are not well informed about which items could yield substantial profits for Nepal,” a source mentioned. “Although the trade balance is unfavorable, we haven’t yet arrived at a solid conclusion in this regard.”

In the fiscal year 2079-80, Nepal exported goods worth NPR 10.76 billion to China while importing goods valued at NPR 222.71 billion. This shows that Nepal’s trade deficit with China is around NPR 210 billion.