China's Debt Trap Makes Nepal Decline Beijing's 'Global Security Initiative'

A year ago in my February 2023 JAPAN Forward column, I questioned whether Nepal was sending mixed signals on the new airport in Pokhara. Was it a Chinese Belt and Road project or not? I wondered if Kathmandu was feeling edgy about BRI's fast-losing momentum. 

The picture became gradually clearer in the ensuing six months. Reports of Nepal being engulfed in China's debt trap over the Pokhara airport deal emerged. 

The New York Times published a detailed investigative report in October 2023. It summarized how "China got a big contract […] Nepal got debt and a pricey airport." The newly constructed international terminal at Pokhara's airport is a project largely financed and executed by Chinese companies. Concerningly, it has many complex and unsettling realities to it. 

The Pokhara airport exemplifies the perils that come with importing China's infrastructure-at-any-cost development model. It disproportionately benefits Chinese firms at the expense of the borrowing nation. China CAMC Engineering, the construction division of state-owned conglomerate Sinomach, played a pivotal role in the Pokhara airport project.

Quality Concerns

Furthermore, The New York Times report revealed how China's CAMC Engineering repeatedly dictated business terms to maximize profits and protect its interests. It also dismantled Nepali oversight of its work. Consequently, Nepal found itself entangled in significant debt to Chinese creditors without the expected influx of passengers to repay the loans. 

Far worse, CAMC's construction work does not meet international standards. Key components, such as soil density tests for the runway's foundation, were omitted, jeopardizing the runway's future stability. 

These only underscore Beijing's piercing predatory practices, which are in gross violation of regional norms. They lack financial sustainability, transparency, and equitable ways of investment that are mutually beneficial to the donor and recipient country.

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The Pokhara airport has become Nepal's Achilles' heel given its poor quality of work and mounting burden of debt on Kathmandu. Not surprisingly, the airport that opened in January 2023 serves as a stark example of the pitfalls that come with choosing China's infrastructure development model.

Nepal Says No

The geostrategic impact of these burdening developments has begun to show in Nepal-China relations. For example, Nepalese Prime Minister Pushpa Kamal Dahal's (alias Prachanda) government in Kathmandu had categorically decided to avoid China's Global Security Initiative (GSI).

In his visit to Beijing, Prachanda agreed to issue a lengthy joint statement that conspicuously failed to mention the GSI. Yet, the GSI forms the core of Xi Jinping's blueprint for a new world order beyond the BRI. 

Together with the Global Development Initiative (GDI) and Global Civilization Initiative (GCI), the three initiatives underpin Xi's vision for a new China-dominated world order. Most significantly, they highlight an intense foreign policy shift towards the Global South. 

Nepal's refrain from endorsing the GSI should serve as a wake-up call to the entire region. The country seemingly is on its way to getting seeped inside China's debt trap through the Pokhara airport project. In turn, this will pave the way for Beijing to begin extracting strategic gains through the deep leverages it has cultivated inside Kathmandu. 

Sri Lanka

How China uses its economic leverage can be seen in the case of fellow South Asian country, Sri Lanka. Initially, Beijing sets up a debt trap for achieving politico-strategic ends at a later stage. This, in fact, has become a predictable pattern in China's geopolitical toolkit. 

An added phenomenon to this strategy is the application of blunt coercion in the case of many lesser-developed and impoverished economies. Nepal has become yet another addition to the list.

Tibet

In the name of safeguarding China's sovereignty and integrity, Beijing has been strengthening its legislative arm for territorial expansion across the Himalayan Borderlands. To achieve this, it introduced a "Land Borders Law" in October 2021 (中华人民共和国陆地国界法). 

There has been an unprecedented outpouring of politico-military activity in the entire Tibet Autonomous Region by senior officials of the CCP. This suggests greater political readiness for "any border situation" that Beijing could be preparing for. 

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The Deputy Secretary and Executive Vice Chairman of the TAR People's Government reportedly examined the border counties of Lhoka and Shigatze. Reports say that during the inspection, discussions regarding the construction plans for a South Asian Grand Corridor took place. The plans are widely viewed as perhaps a subsidiary project of the greater Belt and Road Initiative.

For China, Nepal constitutes a core priority in its neighborhood diplomacy in South Asia. This is especially evident when it comes to spreading connectivity through ports, roads, railways, and aviation networks via the BRI. 

All these initiatives are likely to bear a cumulative impact on China's geopolitical and geostrategic roadmap for South Asia. At a time when America's global influence is being challenged, China sees this as the opportune moment to further its objective of creating an alternative Sinosphere of influence, especially in the Global South.

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• China's Latest White Paper for a 'Global Community of Shared Future': Another Sugar-Coated Saber
• China's Grandiose 'Belt and Road' Initiative Has Flopped

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.