Study on Nepal-China Economic Relations

Study on Nepal-China Economic Relations

Abstract: The Chinese economy is in the process of gradual transformation towards a market economy and opening to the outside world. Nepal is also committed to promoting private sector-led economic growth based on liberalization and deregulated competitive markets. To this effect the country has already introduced a range of policy reforms related to exchanged rate policy, trade and industrial policy, foreign investment policy and privatization. Both countries are now the member of the World Trade Organization. These changes in economic policies of the two neighbors have created favorable.

Key words: World Trade Organization; Comparative Advantage; Imports; Exports; Economic Cooperation

CLC number:F830Article character:AActicle ID:1673 - 0194(2009)21 - 0092 - 04

1Nepal - China Trade

Nepal and china have a long history of trade relations dating back to centuries. Traders from both sides have been engaged in border trade exchanging goods, which met their respective needs since the time immemorial. The difficult terrain and harsh climate made it virtually impossible to produce food and other necessary edibles in Tibet and transportation of these items from mainland china was not economically and physically viable because of inaccessible plateau. Nepalese traders continued to supply food and basic necessities to the Tibetan people in exchange for gold, wool, salt, sheep, and herbs. When Tibet became an Autonomous Region of China, the demand for essential goods increased significantly due to presence of Chinese and dislocation of trade there. In the course of trade some Nepalese traders had established not only their shops but also their homes in Lhasa and also married to Tibetan girls. This reinforced the traditional trade links adding a new dimension in terms of matrimonialrelations. Kerung, Kuti, Mustang, and Olanchunggola served as the main trade routes between Nepal and Tibet and also between Tibet and India via Nepal. The desire to both countries to maintain traditional relation and trade intercourse was also reflected in the Nepal-china Agreement of September 20, 1956, which stated,“the inhabitants of the border districts of the two countries who cross the border to carryout petty trade, to visit friends or relatives, or for seasonal changes of residence may do so as they have done customarily and need not hold passports, visas or other documents of certification.” After the Sino-Indian war in 1962 border trade became