China's Trans-Himalayan Railway: Is Nepal on Its Way to a Monster Debt Trap?

The Pokhara airport in Nepal is openly described by Beijing as a Belt and Road Initiative (BRI) project. As if the debt-related problems surrounding that were not enough, Nepal is moving ahead with the cross-border railway line connectivity project between Lhasa and Kathmandu. 

This is being described as the ultimate pinnacle of connectivity projects between Nepal and China. But the reality is that Nepal is a step away from falling prey to a one-of-its-kind monstrous debt trap with China, following the Pokhara airport project. 

Most worrisome is that both these projects palpably tend to heavily favor China strategically. Nepal's former minister and Nepali Congress leader, Minendra Rijal has raised doubts about the project, asking, "What will we export to China and what will we import from Tibet through the railroad?"

Questions of Feasibility

The 8th Working Meeting on China-Nepal Railway Cooperation was expected to commence "shortly" in 2024, according to reports. Many had dismissed the cross-border rail project as "unfeasible" given that the highlands of Nepal house mountains more than 8,000 m (26,247 ft) high. 

However, the feasibility study of the trans-Himalayan rail line claims that it is well on track, as the latest news report confirms. For this feasibility study itself, China has approved grant assistance of ¥180 million RMB ($24.8 million USD). 

With the aerial survey and mapping complete, The Kathmandu Post has reported that a technical team from the China Railway First Survey and Design Institute Group visited Nepal in December 2023 to conduct a reconnaissance survey of the railway project.

Geological survey and mapping, spatial technical studies, on-site surveying, construction condition studies, and engineering studies began in 2024. They are expected to be completed within the 42-month deadline. 

Building the cross-border railway line between Lhasa and Kathmandu will be a herculean task, especially for Nepal, from both technical and financial perspectives. Nearly 95 percent of this 73 km (45 mi) railway network will require heavy tunneling. 

This puts the region's environmental sensitivity at great risk. China shall likely apply all its experience from constructing the Qinghai-Tibet railway line. It was built at an average elevation of around 4,500 m above sea level. Running for over 1,956 km from Xining to Lhasa, that rail line went into the record books. Its highest point is at an altitude of 5,072 m — above the Peruvian railway in the Andes.

More than 10% of Nepal's GDP

The financial realities and their political and strategic fallouts notwithstanding, the Chinese publication Beijing Review seems to be sowing a diversionary narrative of how "BRI meets Nepal's railway dream." 

This argument is far from the realistic veracity and ensuing dangers emanating from taking such monstrous Chinese loans. The Beijing Review opinion piece terms the project as "a game-changer for Nepal's economic development." However, this nightmarish project seems more likely headed toward becoming a game-changer for Nepal's eventual economic meltdown. In fact, the entire cost to build the "Trans-Himalayan Multi-Dimensional Connectivity Network" as the project is called, will exceed 10% of Nepal's entire GDP!

Estimates suggest the project could cost around $4.8 billion USD for the Nepal segment alone. Nepal is incapable of taking on this kind of expenditure. It naturally implies that a major chunk of the loan shall be provided by China. 

Subsequently, the vicious Chinese debt trap would take over. Failing to pay interest on such huge loan amounts, smaller nations, in this case, Nepal, will eventually be forced to hand over the entire infrastructure project to Beijing.

The Railway to Economic Subordination

Chinese projects and loans are often directed toward resource-rich or strategically placed countries. Around 70% of these countries do not have a good credit rating, or any rating at all. China protects its investment interests in these cash-poor countries by holding project assets as collateral, effectively gaining control over several through this practice.

Instead of prioritizing inviting investment from China, Kathmandu's political leadership's current graph is bent toward seeking aid and grants from Beijing. The trend shall prove ominous in the long run. Nepal's economic subordination to China will become the foundation of its strategic relegation and subservience. This will adversely impact the regional security and politics of the entire South Asia.

Will the Trans-Himalayan rail line be a disaster in terms of its financial viability and sustainability from Nepal's viewpoint, akin to the Pokhara airport? For now, the answer seems an overwhelming yes.

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Author: Dr Monika Chansoria

Learn more about Dr Chansoria and follow her column "All Politics is Global" on JAPAN Forward, and on X (formerly Twitter). The views expressed here are those of the author and do not reflect the views of any organization with which she is affiliated.