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China eyes India trade by beefing up spending in Nepal

KATMANDU -- China's ambassador to Katmandu was recently pictured in a traditional Nepali cap and silk scarf, digging with a spade to symbolize the laying of the foundations of a new dry port near the Tibet border.

The photo opportunity marked the latest in a series of major projects that underscore China's growing economic influence in Nepal, where it is building roads and investing billions of dollars in hydropower and telecommunications.

Other Chinese projects in its impoverished, electricity-starved Himalayan neighbor include a US$1.6 billion hydropower plant which is expected finally to end power outages which extend to 14 hours a day in winter.

Meanwhile China recently completed a 22-kilometer (14-mile) stretch of road in central Nepal connecting the country's southern plains with the Tibetan county of Kyirong, to form the shortest drivable overland route between China and India.

Analysts have questioned whether Beijing's largesse is a gesture to a neighbor in need, or the result of a foreign policy which increasingly sees Nepal's roads and dry ports as a doorway to the huge markets of India.

“I am sure that these infrastructure projects will help win influence in Nepal but they will serve a dual purpose,” said Purna Basnet, a Nepalese political commentator who frequently writes on Chinese influence in Nepal.

“It will be easier for China to supply goods to India via Nepal. There is even a talk of connecting Katmandu with their rail networks in Tibet.

“The Shigatse-Lhasa railway will be completed in a couple of years. From Shigatse, they have plans to connect Katmandu through railways.”

Nepal has always been in the shadow of its southern neighbor India, which has traditionally exerted huge political influence and is Katmandu's biggest trading partner and sole provider of fuel.

Since the end of a bloody decade-long civil war in 2006 and the emergence of the Maoist rebels who fought the state as the largest political party, China has been gradually — and literally — making inroads as a counterweight to India.

Chinese ambassador Yang Houlan outlined his country's vision of Katmandu as a trade gateway to New Delhi in a recent op-ed article in Nepal's English-language Republica newspaper.

“From an economic viewpoint, Nepal links China (with 1.3 billion people) with South Asia (with 1.5 billion). The huge common market provides great opportunities for both China and South Asia,” he wrote.

China's commitment to Nepal is outlined by its construction of a further five dry ports in the Himalayan region where the treacherous terrain marks the 1,414-kilometer long border. It has also offered to fund an international airport in the tourist hub of Pokhara.

On top of infrastructure development, around two dozen Chinese companies have invested US$100 million in housing, hotels, restaurants and other areas of tourism in Nepal. By the end of 2013 annual trade between the two countries is expected to hit US$1.5 billion, a 25-percent rise on an annual basis.

But it's not just about getting rich, say many observers who see China's investment in Nepal as a vital part of its strategy for quelling unrest in a country of 55 ethnic groups where poverty remains a major threat to security.

“In Tibet, unrest has significantly increased, so Chinese investment in Nepal should be understood in the context of China's integrity, which is very important for the giant nation,” said Katmandu-based strategic affairs analyst Lekhnath Paudel.

“Some Indian analysts repeatedly warn that China has built these ports to prepare for a war with India,” he added.

“It will definitely provide China with an edge but at heart, its goal is to expand the economic opportunity to its workforce and make them loyal to the state.”

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