In Nepal, China shows desperation rather than confidence in competing with India

In a recent speech in the Nepalese capital of Kathmandu, Chen Song, the Chinese Ambassador, told the Nepalese people that they were unfortunate to “have a neighbor like India.” Chen warned Nepal of the dangers of trading with India, downplaying the importance of India-Nepal relations and instead encouraging a closer relationship with China.

Geographically, culturally, politically and economically close to India, Nepal has become the focus of Chinese attempts to challenge India in its own neighborhood. China’s leader Xi Jinping also raised eyebrows by deciding to skip the G20 summit, in what was widely seen as a snub to his would-be host, India — China’s main rival in the Global South.

While Chen said few positive things about India in his speech, he did acknowledge the impressive growth of the Indian economy. “India’s economy is starting to soar,” he said — a tacit acknowledgement of China’s growing concern about competing with India. But he stopped short of admitting that China’s own economy is, in fact, struggling massively.

Although the ambassador’s undiplomatic tone is not particularly surprising, the desperation in his voice was new — his speech sounded more anxious than confident. Nepal has been slow to move forward with projects that are part of Xi Jinping’s signature Belt and Road infrastructure plan. Nepal’s reluctance may be due in part to the failure of existing Chinese projects. The Pokhara International Airport, for example, was built with high-interest Chinese loans by Chinese-owned firms, but has not received any regular international flights since its inauguration in January 2023, raising concerns that it may be nothing more than a debt trap for Nepal.

Cooperation with China has also been marred by alarming reports of Chinese criminal syndicates operating from Nepal in human trafficking, online fraud and illegal currency trading. Beijing has been pushing hard this year for Nepal to join its new “Global Security Initiative,” a new concept aimed at undermining NATO. Nepal has so far resisted, and cooperation with India is outpacing that with China.

After decades of astonishing growth, the Chinese economy seems to be stalling. In August, China stopped publishing unemployment statistics altogether after youth unemployment hit an all-time high of over 20 percent. Domestically, consumers are anxious about job prospects, and any economic stimulus is unlikely to come from consumer spending. International investors are also pessimistic about the future of the Chinese economy.

Rising labor costs in China and growing international concern over supply chain vulnerabilities are leading to an exodus of manufacturers to India, Vietnam and Bangladesh. Chinese exports are declining, and Beijing faces significant challenges in maintaining its once-dominant role in regional supply chains. China’s economic woes are not without political consequences for Xi Jinping, adding to the Chinese Communist Party’s desperation.

In contrast, India’s trajectory remains positive. After rapid economic growth of 7.2 percent in FY2023, economic momentum has been maintained. If this current growth continues, the biggest story of the 21st century may prove to be the rise of India rather than China.

Against this backdrop of economic decline, Chen’s comments in Nepal and Xi Jinping’s decision to skip the G20 summit in India should be read not as the confident moves of a rising superpower, but as the desperate maneuvers of a failing competitor. China’s leaders recognize that their country is losing ground to India in Nepal and are aware that their propagandistic narrative of miraculous growth has lost its luster.

The rivalry between China and India is the second-most important national competition in the world today, after the United States and China. People often compare various aspects of the U.S. and China to judge the merits and demerits of democracy and autocracy. Perhaps a more telling comparison should be made between India and China.

Although India is a democracy, it is a flawed one with considerable room for improvement. Nevertheless, the foundation of India’s political system is democratic and based on the rule of law, which is fundamentally different from China’s authoritarian system. In fact, since the Tiananmen Square Massacre of 1989, the CCP regime has often used India as a negative example to dampen the Chinese people’s desire for democracy. The outcome of this rivalry of the world’s two most populous countries will shape the future of the international liberal order.

Jianli Yang is Founder and President of Citizen Power Initiatives and the author of “For Us, The Living: A Journey to Shine the Light on Truth” and “It’s Time for a Values-Based ‘Economic NATO.’”