Has the Araniko Highway in Nepal Become Less Important to China?

The Nepali government has decided to turn down an economic and technical package the Chinese government promised nine years ago for the upgradation of the Araniko Highway. Kathmandu has opted to self-fund the project.

“Since the Chinese government won’t release the amount in the foreseeable future, we have allocated [Nepali] Rs 3.6 billion from our own budget to carry out maintenance along a 26-km section of the highway and manage landslides based on the detailed project report prepared by the Department of Roads,” Madhav Sapkota, a lawmaker of the Communist Party of Nepal-Maoist Center (CPN-MC) from Sindhupalchok district, said at an event organized by the Centre for Social Inclusion and Federalism (CESIF) in Kathmandu on July 23, Kathmandu Post reported.

The 115-km Araniko Highway links the Nepali capital of Kathmandu with Kodari at the Nepal-China border. Across this border is the Tibetan market town of Zhangmu, which is linked to the Chinese national highway network.

China and Nepal signed an agreement on building the highway in October 1961. Construction work began in 1963 and the road was officially opened in 1967.

The Araniko Highway runs through treacherous topography; along several stretches the road looks down extremely steep mountains. The terrain is unstable and has seen major earthquakes and frequent landslides, rendering the highway frequently non-operational.

In late March 2015, during Nepali President Ram Baran Yadav’s visit to China to attend the Boao Forum in Hainan province, Chinese President Xi Jinping announced a 900 million yuan (around $123 million) aid package to upgrade the Araniko Highway from a two-lane road to a six-lane metaled highway.

The following month, a massive earthquake hit Nepal and the Araniko Highway suffered severe damage. China began repair work in August 2016 and has completed three phases under the Araniko Highway Long-Term Maintenance Project.

“But the promised upgrade of the highway is yet to begin,” Sapkota said, adding that despite multiple reminders, China did not release the funds. “And so, we decided to fund the work with our own resources,” he said.

According to Smruti S. Pattanaik, a research fellow at the New Delhi-based Manohar Parrikar Institute for Defense Studies and Analyses, China did not release funds for the Araniko Highway’s upgradation because “Nepal rejected the Chinese proposal of including it under the Belt and Road Initiative (BRI).”

China has been keen to bring projects its companies are implementing under the ambit of BRI. This is the case, for instance, with the Pokhara International Airport project. Beijing has been describing it as a “flagship project” of BRI, a designation that Nepal has rejected.

Additionally, China is “unhappy over Nepal’s reluctance to allow BRI projects to progress. There has been a delay in the negotiation of nine projects that China wants to build under the BRI,” Pattanaik told The Diplomat.

Nepal and China signed the BRI framework agreement in May 2017.  Seven years thereon, the two sides are yet to finalize the text of an implementation plan that China proposed in early 2020.

The question of finance is among the contentious issues. “Nepal prefers grant projects as it is apprehensive of the debt it will incur from loans,” Pattanaik said, pointing out that “the Sri Lankan debt crisis served as a wake-up call for Nepal” and has made it cautious. “Nepal is negotiating very carefully.”

A Himalayan country that is sandwiched between China and India, Nepal’s location has bestowed it with immense strategic significance. Indeed, the Araniko Highway holds great significance in the region’s geopolitics.

When the Nepali King Mahendra accepted the Chinese proposal for a road linking Kathmandu to Kodari, Nepal and the region were caught in the vortex of fast-changing developments. Sino-Indian relations were deteriorating rapidly. An election in Nepal in 1959 brought to power the India-backed Nepali Congress (NC). In December 1960, King Mahendra suspended the Constitution, dissolved parliament, and dismissed the NC government. Eager to reduce landlocked Nepal’s dependence on India, he reached out to China and agreed to their proposal for a highway linking Kathmandu to Kodari.

The Araniko Highway, as the Kathmandu-Kodari Road was named subsequently, “pierced the Himalayas,” John W. Garver wrote in “Protracted Contest: Sino-Indian Rivalry in the Twentieth Century” (2001). Understandably India was concerned. As Prime Minister Jawaharlal Nehru pointed out to the Indian Parliament “India’s security interests would be adversely affected by the road.”

When India conveyed its apprehensions to King Mahendra, the latter derided the concerns saying, “Communism will not arrive in Nepal via a taxi cab.” But India’s worry related to Chinese tanks rolling into the Kathmandu Valley via the proposed highway, Garver cited American academic and Himalayan expert Leo E. Rose as arguing.

The construction of the Araniko Highway back in the 1960s was a major milestone in the region’s geopolitics. After all, it enabled China to breach the Himalayas.

However, the importance of this highway to the Chinese appears to have declined over the past decade.

When the 2015 earthquake severely damaged areas around the Zhangmu/Kodari border crossing and stretches of the Araniko Highway, the latter was rendered impassable, prompting China to shift focus from the Zhangmu-Kodari crossing to the other Sino-Nepali border crossing at Kerung-Rasuwagadhi. Indeed, the Rasuwagadhi-Kerung crossing, which was opened in December 2014, was the only point of bilateral trade between Nepal and China for several years until the Araniko Highway was repaired in 2019.

A Nepali government official who spoke to The Diplomat on condition of anonymity said that China is developing state-of-the art infrastructure at the Kerung-Rasuwadhi crossing. It appears to be “prioritizing this crossing over the Zhangmu-Kodari crossing,” he said.

China’s interest in the Kerung-Rasuwagadhi crossing is not new. When it proposed a road connecting Kathmandu to the China-Nepal border in the early 1960s, it had pushed for the crossing at Rasuwagdhi. King Mahendra preferred the highway running up to Kodari, and this led to the Chinese constructing the historic highway running from Kathmandu to Kodari.

The renewed Chinese interest in the Kerung-Rusawgadhi crossing could have been prompted by the geological challenges that have repeatedly battered the Kerung-Rusawadhi crossing, approach roads, and the Araniko route, according to Sam Cowan, a retired British general who is familiar with Nepal’s topography. “The damage caused by the 2015 earthquake and the 2016 Bhote Koshi flood could have been taken as reinforcing the decision” to prioritize the Kerung-Rusawagadhi crossing, he wrote in The Record, a Nepali digital publication. ​

Declining Chinese interest in conducting trade through the Zhangmu-Kodari crossing could, therefore, be another reason for China delaying its delivery of promised aid for the Araniko Highway. However, the future of the Araniko Highway is not bleak.

As Cowan pointed out, “In strategic terms, just one of anything is dangerous. China will want to retain Kodari as a fallback option in case there are serious problems at Rasuwagadhi.”

Upgradation of the Araniko Highway may not be an immediate priority for the Chinese. But it will ensure its maintenance.