China has renewed its proposal to deepen economic ties with Nepal through the signing of a Bilateral Investment Agreement (BIA) and a Free Trade Agreement (FTA), aiming to safeguard and boost Chinese investment in the South Asian country. The initiative was presented during meetings on July 8 and 9 between Chinese Vice Minister for Commerce Yan Dong and senior Nepali officials, including Industry, Commerce and Supplies Minister Gauri Kumari and Finance Secretary Ghanshyam Upadhyaya.

In discussions with Minister Kumari, Yan emphasized China’s position as the largest source of foreign direct investment (FDI) in Nepal and urged the establishment of a one-stop service center to facilitate Chinese investors. He highlighted the potential benefits for Nepal in adopting elements of China’s economic liberalization model introduced in 1978, such as corporate tax incentives, to attract investment. Yan reiterated China’s interest in concluding a free trade pact with Nepal, an agreement that has previously featured in bilateral dialogues and was included in the revised framework for Belt and Road Cooperation signed in December 2024. He offered flexibility on the FTA’s naming to address any reservations Nepal might have.

Despite the renewed push, Minister Kumari refrained from making immediate commitments and indicated that Nepal would carefully assess the possible benefits and challenges of an FTA before deciding its position. Nepal had earlier explored the idea in 2016 but abandoned the initiative due to concerns over economic asymmetry and the widening trade deficit with China. The FTA proposal was later removed from a 2017 memorandum related to the Belt and Road Initiative after Nepal’s objections.

Vice Minister Yan also proposed conducting joint studies to identify and promote Nepali export products such as tea and medicinal herbs, drawing parallels to similar efforts in other South Asian countries. He underscored the importance of enhancing coordination between Nepal’s Ministry of Industry, Commerce and Supplies and China’s Ministry of Commerce to foster increased trade and investment. Yan pledged China’s ongoing support in facilitating Nepali participation in trade fairs in China and offered assistance in upgrading trade infrastructure at key border crossings, including Tatopani and Rasuwagadhi.

On the investment front, Yan reiterated China’s readiness to back foreign investment in Nepal and expressed confidence that a more transparent and investor-friendly environment would further increase Chinese investment. Discussions with Finance Secretary Upadhyaya focused on accelerating Chinese-funded infrastructure projects, including the Kimathanka-Khadbari road, Hilsa-Simikot road, Syafrubeshi-Rasuwagadhi road, and associated bridges, which are currently at various stages of completion.

China also pressed for Nepal’s endorsement of a BIA and sought support on trade matters within the World Trade Organization’s dispute settlement framework. The BIA proposal dates back to 2012, following Nepal’s signing of a similar agreement with India in 2011, which remains under legal challenge. Although Nepal and China agreed in principle to a BIA in 2014 and exchanged drafts, negotiations have advanced slowly. Nepal has bilateral investment protection agreements with six countries, including France, Germany, and India.

A Finance Ministry official indicated that Nepal is open to further negotiations, emphasizing that the proposed BIA draft includes provisions on investment promotion, investor protection, and security guarantees. Meanwhile, Minister Kumari highlighted the need to expand cooperation beyond trade and investment into areas such as industrial development, infrastructure construction, trade facilitation, and supply chain strengthening, reflecting Nepal’s broader economic priorities as it seeks to attract sustainable foreign investment.