Nepal has formally inked a major deal with China to join President Xi Jinping's ambitious 'One Belt One Road' initiative to link Asia with Europe, a move that could raise concerns in India.
The long-discussed deal between Nepal and its much bigger neighbour comes just days before China hosts a summit for 28 leaders near Beijing on May 14 and 15, 2017 showcasing the ambitious plan.
Chinese Ambassador to Nepal Yu Hong and Nepal's Foreign Secretary Shankar Bairagi signed an MoU on Friday May 12,2017 at the Ministry of Foreign Affairs in Kathmandu. Deputy Prime Minister and Minister of Finance Krishna Bahadur Mahara and Minister for Foreign Affairs Prakash Sharan Mahat were present during the signing ceremony.
"This agreement will bring Nepal and China closer through road connectivity and bring home the Chinese investment," Mahat said.
"With the signing of the MoU, a new chapter has begun in the area of foreign investment and trade promotion," he said, adding Nepal would reap benefits from the Chinese project which would expand to Europe and Africa. "Nepal needs the maximum investment and we want Chinese investment channelled in Nepal through this new project."
"Nepal would benefit from this important project initiated by China and that this should be taken as a significant achievement of Nepal's development endeavour," Bairagi said.
Yu expressed hope that the project would contribute to enhancement of China-Nepal cooperation as well as to the economic development of the South Asia region itself.
The One Belt, One Road Initiative (OBOR) spearheaded by President Xi Jinping would see 60 percent of the global population and around a third of global GDP-linked through a network of Chinese-bankrolled ports, railways, roads and industrial parks.
The deal will see China plough money into Nepal for a series of projects including boosting its road network, power grid and a new railway connecting the capital Kathmandu with Lhasa in Tibet.
Nepal signing the deal with China may cause concerns in India, which has opposed Beijing's initiative. India has reservations over the China-Pakistan Economic Corridor, part of the OBOR, as it is proposed to pass through the Pakistan-occupied Kashmir.
India, which has traditionally enjoyed great economic and political ties with Nepal, has faced increasing competition from China in recent years.
Landlocked Nepal relies heavily on imports from India and completely on Indian ports for sea access.
Analysts have also expressed concerns over the Asian giant's attempt to take a lead in global commerce, cautioning that an integrated world trade system where China's Communist party sets the rules could come with serious risks and hidden costs.
New York-based Fitch Ratings said that political motivations might trump "genuine infrastructure needs and commercial logic", leading to "a heightened risk of projects proving unprofitable".
Struggling countries could be saddled with Chinese loans requiring payment regardless of project performance, Fitch Ratings said.
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