KATHMANDU: In August 2025, Chinese Foreign Minister Wang Yi visited New Delhi, marking the first ministerial-level engagement from China since the two countries agreed in October 2024 to disengage at the border.

During his meeting with Prime Minister Narendra Modi, Wang acknowledged that India–China relations have seen “ups and downs,” emphasizing the importance of learning from past experiences to stabilize bilateral ties.

Later, Prime Minister Modi attended the SCO summit, where he held a meeting with President Xi Jinping. Both leaders referred to their nations as “partners, not rivals.” The recent imposition of tariffs by the United States on both India and China, along with sustained pressure on India regarding trade policies, has shifted the strategic landscape in South Asia.

The prospect of India–China re-engagement has prompted neighboring countries to closely monitor developments, and regional experts have begun assessing the potential implications and strategies needed in the event of greater India–China alignment.

Nepal, situated between India and China, is often described as the “yam between two boulders.” Being surrounded by two major powers presents both challenges and opportunities when it comes to managing bilateral relations with each.

Walking a Tightrope: Nepal’s Strategic Balancing Act

For Nepal, managing relations with India and China is akin to walking a tightrope. While tensions between the two giants are difficult to navigate, their alignment can be equally, if not more, challenging. Traditionally, analysts argue that Nepal suffers most during India–China tensions, as the Himalayan state becomes a frontline for suspicion, influence, and strategic competition.

However, what is less explored is the reality that even in times of India–China cooperation, Nepal faces serious diplomatic and strategic difficulties. During periods of tension, Nepal has often been accused by both sides of favoring the other. India tends to view Nepal’s engagement with China with suspicion, while China has accused Nepal of being too close to India.

These tensions have had tangible effects on Nepal’s economy. For example, India’s skepticism of Chinese investment has negatively impacted projects such as the Bhairahawa Airport.

India has also consistently expressed concerns about Nepal’s involvement in China’s Belt and Road Initiative (BRI), pressuring Kathmandu to limit its participation.

Meanwhile, China has pushed Nepal to sign an extradition treaty widely believed to target Tibetan refugees—an agreement Nepal has resisted. Instead, Nepal agreed only to a “Mutual Legal Assistance Treaty” to avoid alienating either China or the West.

Alignment Brings New Challenges

India–China alignment also presents new dilemmas for Nepal. A recent example is the bilateral agreement between India and China to reopen the Lipulekh Pass, a route that Nepal claims as its own territory. The tri-junction of India, Nepal, and China has long been disputed, yet India and China decided to reopen trade via Lipulekh, Shipki La, and Nathu La without consulting Nepal.

This move has been seen as a diplomatic setback for Nepal and a marginalization of its sovereignty, illustrating that great power alignment can be as damaging as rivalry.

If India and China begin cooperating on regional infrastructure, security, or connectivity projects, Nepal may find itself forced to accept decisions without meaningful input. Joint India–China initiatives could bypass Nepal altogether, undermining its role as a transit hub. This puts Nepal in a difficult position—during conflict, it risks becoming a proxy battleground; during alignment, it risks being sidelined.

Turning Challenges into Opportunities

Despite these challenges, India–China cooperation could also offer opportunities for Nepal. Reduced geopolitical tension between the two powers could allow Nepal to attract investment from both sides with less suspicion. It could pursue a development-oriented strategy focused on economic growth rather than being caught in their rivalry.

Nepal could benefit from greater cooperation in sectors like infrastructure and hydropower, and alignment could reduce the risk of one country blocking the other’s projects (as in the Bhairahawa Airport case).

With both India and China on board, Nepal could access Chinese financing while leveraging the Indian market—creating a win-win climate for development.

Furthermore, regional alignment could facilitate cross-border movement and tourism. Nepal could position itself as a neutral tourism hub for Indian and Chinese travelers, promoting trilateral cultural and religious routes like Lumbini (the birthplace of Buddha) and the Kailash–Mansarovar pilgrimage.

Nepal’s strategic position between two rising powers continues to be both a challenge and an opportunity. Whether during periods of rivalry or cooperation between India and China, Nepal must carefully calibrate its foreign policy to safeguard its sovereignty, promote national interests, and maximize development opportunities. With smart diplomacy, Nepal can transform geopolitical risks into strategic advantages—ensuring it is not merely a bystander, but an active participant in shaping the region’s future.

India–China Engagement

India and China, which went to war in 1962, are widely regarded as rival states in the South Asian region. Their relationship has long been defined by deep-seated differences, particularly border disputes and repeated military confrontations. The broader regional politics of South Asia are significantly influenced by this rivalry, with neighboring countries adopting various strategies to balance their ties with the two powers.

The current engagement between India and China is not a new development for the region. South Asia has witnessed a long history of fluctuating relations between the two, from the optimistic slogan of “Hindi-Chini Bhai Bhai” during the Nehru–Zhou Enlai era, to more recent military clashes and high-level meetings such as the Modi–Xi summit in Chennai. However, such political gestures have not been strong enough to overcome deeply entrenched structural differences. Core issues—such as unresolved border disputes, the status of Tibet, and matters relating to the Dalai Lama—continue to shape the nature of bilateral relations.

India and China’s relationship can best be described as one of pragmatic engagement, particularly visible when external global pressures push them toward cooperation. For instance, in the 1950s, during the Cold War, the two countries sought common ground as non-aligned partners.

A similar trend is visible today, as both nations respond to the United States’ imposition of unilateral tariffs and the broader challenges of global economic instability. Their engagement tends to be strategic, motivated by short-term necessities, rather than based on resolution of core issues.

Historically, the relationship between India and China follows a recurring pattern—a cycle of engagement, tension, and reset.

During the engagement phase, the two countries pursue cooperation, dialogue, and symbolic displays of friendship, often driven by strategic needs or external circumstances.

However, this is usually temporary, as long-standing disputes resurface, leading to a phase of renewed tension.

Key triggers of conflict include border clashes, the Tibet issue, regional rivalry, and third-party involvement. India’s strategic cooperation with the QUAD, as well as competition with China in countries like Nepal, Bhutan, Sri Lanka, and the Maldives, further complicates matters. India is particularly wary of China’s close engagement with Pakistan. These tensions are followed by a reset phase, in which both sides—recognizing the cost of escalation—seek to stabilize ties without actually resolving the core disputes.

Way Forward for Nepal

As Nepal formulates its foreign policy strategy, it must acknowledge that the current India–China engagement is unlikely to be permanent. The historical pattern of fluctuating relations—marked by phases of engagement, tension, and reset—combined with deeply rooted differences, suggests that alignment between the two powers is often fragile. Nepal should continue its long-standing approach of strategic balancing, while maintaining a firm commitment to preventing its territory from being used against either of its immediate neighbors.

In the current engagement phase, Nepal has an opportunity to leverage the relatively stable relations between India and China to attract greater economic investment. Both countries may be less suspicious of each other’s involvement in Nepal during this time, which allows Kathmandu to focus on pursuing economic development without being drawn into regional rivalries.

By capitalizing on this phase of alignment, Nepal can work toward strengthening its economy, enhancing infrastructure, and diversifying partnerships—thereby positioning itself more strongly for the inevitable tensions that may follow.

At the same time, Nepal must avoid becoming overly dependent on either India or China. To ensure its strategic autonomy, Nepal should also focus on expanding relations with other global and regional powers, such as the United States, Japan, the European Union, and ASEAN countries.

This broader engagement will help Nepal maintain a balanced foreign policy, reduce its vulnerability to geopolitical shifts, and strengthen its role as a sovereign actor in regional affairs.