Nepal’s delicate balancing act: Challenges of dealing with China and India

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Nepal’s delicate balancing act: Challenges of dealing with China and India

By LB Thapa

Rastriya Swatantra Party (RSP) left all major political parties in Nepal astonished by securing nearly a two-thirds majority in the general election. As a result, Balen Shah, the charismatic former mayor of Kathmandu, has become the country’s next prime minister. 

From the very start of his tenure as mayor, Shah impressed the people of Kathmandu with his unique personality and unconventional working style, quickly capturing the attention of the nation’s youth. 

What Shah’s rise means for Nepal’s foreign policy 

The outcome of this election marks a seismic shift in Nepali politics, and it is expected to have significant implications for Nepal’s relations with its two giant neighbors, India and China. It remains to be seen how Shah’s government will maintain the delicate political equilibrium between New Delhi and Beijing. 

Sandwiched between two mighty powers, Nepal cannot afford to side with one against the other. It must tread carefully to preserve cordial relations with both. 

A sharp contrast to the Oli Era 

Balen Shah’s rise represents a stark departure from previous leadership. K.P. Sharma Oli, chairman of the Communist Party of Nepal (Unified Marxist–Leninist), maintained close ties with Beijing during his time in power. Under Oli, Nepal deepened cooperation with China, including infrastructure projects linked to the Belt and Road Initiative (BRI). Now that voters have unceremoniously voted Oli’s government out, all eyes are on how China will respond to Shah’s leadership. 

Proven leadership as mayor of Kathmandu 

Many political parties and media outlets have commented extensively on Shah’s working style and his approach to governance. Yet he has proven his mettle through outstanding work as Kathmandu’s mayor. Over the past three years, the capital has changed dramatically—a transformation that speaks for itself. 

Shah’s performance has shown that he is different and capable of delivering results. He no longer needs to explain how or whether he can govern effectively; the visible renewal of Kathmandu is evidence enough. 

Territorial disputes and a cautious stance on China 

As mayor, Shah strongly supported a new political map of Nepal that includes the disputed territories of Lipulekh and Limpiyadhura within Nepal’s borders. How his government will approach India on this matter is now a key question. 

What is already clear is that dealing with both China and India simultaneously will be no easy task for the new administration. Moreover, Shah’s government faces numerous internal and external challenges on political and economic fronts. 

Based on his past record, Shah appears to be more cautious about China’s influence. While he has not presented himself as openly anti-China, he has repeatedly raised concerns over national sovereignty and Beijing’s growing role in Nepal’s political and economic decisions. On several occasions, he has used social media to question policies that he believes undermine Nepal’s territorial interests. 

Symbolic acts and policy signals 

During Oli’s visit to China, Shah publicly urged him to raise Nepal’s claims over the Lipulekh Pass—a long-contested area between Nepal and India. Shah has also taken symbolic actions signaling discomfort with Beijing. In 2023, he canceled a planned visit to China after Beijing released a map showing territory claimed by Nepal as belonging to India. Shah stated that the decision was made on ethical grounds. 

His stance extends to economic cooperation as well. During his election campaign, Shah removed a China-funded industrial park project—linked to the Belt and Road Initiative—from his manifesto, citing concerns over its location near India’s strategically vital Siliguri Corridor, the narrow strip of land connecting mainland India with its northeastern states. The move underscored Shah’s independent political views and firm stance on national interests. 

Balancing economic dependence and political autonomy 

That said, Shah has also urged foreign investment — including from China — in Nepal. China remains a major financial partner for the country, with outstanding infrastructure loans estimated at around $3 billion. Shah has acknowledged that Nepal needs foreign capital to develop. 

At the same time, he has criticized parts of Nepal’s political elite for maintaining overly close relationships with Beijing. Now that Shah has become prime minister, managing this balance will prove difficult. Navigating economic dependence while asserting political autonomy may become one of the biggest tests for his government. 

Unpredictability: Beijing’s real concern? 

For Beijing, the bigger concern may be unpredictability. Unlike previous leaders, Balen Shah comes from outside Nepal’s traditional political establishment. That very fact could reshape how Kathmandu deals with China in the years ahead. 

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