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Nepal's Trade Deficit with China Widens Amid BRI Dependency

Nepal is experiencing a severe trade imbalance with China, importing goods worth over Rs 195 billion while exporting very little. Infrastructure financing under the Belt and Road Initiative exacerbates this asymmetry, as Chinese firms capture most project contracts. Nepal's small manufacturing sector struggles to compete with Chinese imports, eroding domestic market share. The country's central bank and finance ministry view this import dependence as a structural risk, but alternative solutions are limited by capital and policy constraints.

Key Points: Nepal-China Trade Deficit Risks on BRI Projects

  • Nepal's imports from China exceed Rs 195 billion, exports are minimal
  • Over 60% of Chinese-funded BRI projects globally go to Chinese firms
  • Nepali firms only participate marginally in domestic projects
  • Import dependence on China is a structural risk, per Nepal's central bank
  • Remedies require diversification or domestic capacity, but Chinese capital terms reinforce imbalance
2 min read

Nepal stuck in asymmetrical economic ties with China

Nepal faces a widening trade deficit with China, importing Rs 195 billion while exporting little. BRI financing and Chinese firms dominate projects, raising structural concerns.

"Nepal's manufacturing sector is small by regional standards... Chinese import categories... have seen market share erode. - Eurasia Review article"

New Delhi, April 26

Nepal is facing an ever-widening trade deficit with China as it imports goods such as electronics, machinery, vehicles and textiles from the neighbouring country, while its exports, in return, are a small fraction of this amount, an article noted.

The asymmetry is stark as in the first half of the financial year 2025-26, Nepal's imports from China exceeded Rs 195 billion, while exports to China amounted to a small percentage, according to the article in Eurasia Review.

It highlights that infrastructure financing under the Belt and Road Initiative, which Nepal formally joined in 2017, reinforces this structural imbalance between the two countries. According to World Bank research, more than 60 per cent of Chinese-funded BRI projects globally are awarded to Chinese firms, compared to roughly 30 per cent in projects funded by non-Chinese institutions.

Nepali construction firms tend to participate at the margins of projects in their own country, while Chinese firms capture equipment contracts and specialised engineering work.

"Nepal's manufacturing sector is small by regional standards. Industrial output is concentrated in food processing, textiles, and some construction materials. In sectors that overlap with Chinese import categories, Nepali producers have seen market share erode. This is partly a competitiveness problem and partly a policy problem, since the FDI terms that bring Chinese capital can also bring Chinese competition into domestic markets," the article pointed out.

Nepal's central bank and Finance Ministry have both identified import dependence on China as a structural risk in their public planning documents. The remedies require either diversifying Nepal's import sources, which requires alternative trade agreements and supply chain development or building domestic productive capacity in import-competing sectors, which requires capital investment and skills development at a scale Nepal cannot currently fund domestically. Chinese capital is available for both. The terms tend to circle back to the same place, the article added.

- IANS

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Reader Comments

P
Priya S
As an Indian, I feel for Nepal. They're stuck between two giants. But honestly, their government should have negotiated better terms with China instead of just signing BRI without proper safeguards. Look at how Bhutan manages its trade - that's the model to follow.
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Rohit P
The article highlights a crucial point - Chinese FDI often brings competition that kills local industries. We saw similar issues in India with Chinese mobile imports. Nepal must prioritize domestic manufacturing even if it means slower growth initially. Better than becoming a permanent market for Chinese goods. 🇮🇳🤝🇳🇵
K
Kavya N
This is a wake-up call for all South Asian nations. The BRI is not charity - it's strategic economic penetration. Nepal needs to diversify trade partners and invest in skill development. India should also step up and offer better trade terms to our neighbors before it's too late.
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Siddharth J
The data is clear - 60% of BRI projects going to Chinese firms is unacceptable. Nepal should demand technology transfer and local hiring requirements like India does with defense deals. Otherwise this is just modern colonialism in the name of development. 🚩
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Meera T
Respectfully, I think Nepal needs to take more responsibility. Every country must build its own industrial base instead of relying on imports. India faced similar issues in the 1990s but we reformed. Nepal should do the same - reduce red tape, improve infrastructure, and attract diverse investment. Blaming China alone won't solve the problem.

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