Econ-ity on Leveraging India-China Bilateral Relations

Kathmandu, 13 August 2018:

As India and China ramp up their economic activities within and beyond the regional borders, Nepal, as a country right next door to both could benefit immensely from their aggressive pursuit of growth. Addressing the issue, Samriddhi Foundation hosted an ‘Econ-ity’ discussion on “Leveraging India-China Bilateral Relations,” at Hotel Annapurna. Econ-ity is Samriddhi Foundation’s regular discussion platform for sharing perspectives from different sides on political economic agendas that are important in the contemporary context.

The dialogue explored avenues created by India-China bilateral relations, their new foreign policy approach as well as Nepal’s bilateral relations with each that Nepal could leverage for its greater benefit. The event delved into emerging trends in India-China bilateral relations as well as Nepal’s bilateral relations with both vis-à-vis their individual aspirations. The implications of the recent developments and the benefits that will accrue to Nepal (or the risks that Nepal should be prepared for) were also discussed in the session. The program attempted to inform the larger Nepalese mass on the possible future directions that Nepal is heading towards based on contemporary regional developments.

This edition of econ-ity was moderated by Dr. Swarnim Waglé, former VC of the National Planning Commission. The discourse engaged sectorial experts, academics, former secretaries and ambassadors, think-tank leaders from Nepal and beyond, top editors from the media and opinion shapers.

Dr. Waglé opened the discourse by reminding all that the centre of gravity of the global economy is shifting and by the next generation it will likely have moved from Europe centric global economy to more of an Asia centric global economy, and that Nepal will most likely be right in the middle of it. As a background, he also shared that striking sovereign reciprocity on a relationship that is structurally asymmetric is the key to sound bilateral relations. He then invited the participants to help us understand how Nepal could leverage relations with India and China in terms of three key aspects — humanitarian assistance, foreign aid (both hard and soft) and the exercise of soft power (as all rising powers need allies and friends and both are trying hard to earn them friends in the region).


Prof. Andrew Nathan of Columbia University

Prof. Nathan said that China’s main concerns at the moment are its national security, territory integrity, economic security. China is struggling with its own territorial and foreign policy issues with Tibet, Taiwan, Shenzhen and Hong Kong. But China still does have tremendous influence over south Asia, nonetheless •          China does not have the power to take over as it itself is surrounded by big powers like India, Russia, Korea and Japan.

Mr. Nishan De Mel, Executive Director of Verité Research in Sri-Lanka shared Sri-Lanka’s experience with China to the audience. For a poor country, concessionary lending is generally on high supply; but as it continues to grow, the supply of such cheap loans from multilaterals dries up while the hunger for growth does not diminish. After the financial crisis in the US – China’s biggest borrower, China looked to diversify its lending and Sri-lanka was right there, looking to diversify its borrowing port-folio. Sri-Lanka then had two options—either bilateral borrowing or international financial markets (IFM) (which constitutes as much as 47% of Sri-Lanka’s borrowing portfolio). He shared that since IFM borrowing is expensive (6%+) while Chinese lending that is available at 5-6%, or even 2% for Sri-Lanka, China becomes the natural bilateral partner. This cheap finance, he stressed, can be a huge opportunity for growth.

The program ended with a lively interaction with the members of the audience. There was a general consensus that if small countries like Nepal (or others in the region) are to benefit from the growth of India and China, then we have a very short window of opportunity to capitalize and therefore we need to move fast.

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