1 month ago
Last Updated:February 28, 2025, 14:37 IST
China’s increased engagement in Nepal is seen as part of its strategy to weaken India’s regional dominance, say intelligence sources
China views Nepal as critical to securing its restive Tibet Autonomous Region. (File)
Nepal’s addition to the Financial Action Task Force’s (FATF) grey list could be a result of its proximity to China and the misuse of Chinese funds, say top intelligence sources.
“It could be a move by the West to stop Nepal’s tilt towards China. The West understands that Nepal is becoming a colony of China. There are a number of unknown companies and entities who are moving funds from Nepal to unknown places," said sources.
Moreover, Nepal also failed to give satisfactory replies to FATF’s questions. “The West is upset as people who suffered during the insurgency have not been rehabilitated with pressure from opposition leader Prachanda," said sources.
THE GREY LIST
Being put on the grey list means the country cannot control money-laundering and terror-financing operations and is put under increased monitoring by FATF, an inter-governmental body. It restricts access to the international trade and financial system.
The country can face difficulty in getting loans from multilateral organisations like Monetary Fund (IMF) and the World Bank. Being on the FATF grey list is a warning to the countries to take corrective measures, failing which they will be moved to the stringent ‘FATF Black List’.
The FATF was established in July 1989 by a G-7 Summit in Paris, initially to examine and develop measures to combat money laundering. After the 9/11 attacks in the US, the FATF in October 2001 expanded its mandate to incorporate efforts to combat terrorist financing, and in April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.
This is the second time Nepal has been placed on the grey list, which includes countries with strategic deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CFT) regimes. Nepal was on the FATF grey list from 2008 to 2014.
ILLEGAL FUNDING, MAOIST INSURGENCY
According to sources, two elements are responsible for the grey list fiasco — illegal funding and Maoist insurgency. “China is giving loan and grants to Nepal. While a loan has to be returned, grants need not be returned. This is why Nepal’s politicians are using them as per their wish. After the grants, the West fears that Nepalese may not go against China, which is the reason behind the mounting pressure."
While the US and China both are aiming for a stronger foothold in Nepal, the Chinese investment is considerable. “The USAID has already been stopped and the IMF will be strict after this," said sources.
CHINESE EXPANSIONISM
China’s expansionism has been a cause for concern for all. China’s increased engagement in Nepal is seen as part of its strategy to weaken India’s regional dominance.
According to highly placed intelligence sources, earlier Tibetan refugees, who escaped from China used to enter Nepal, and after due diligence, Nepal used to hand them over to India. “Now, they are sent back to China where they are arrested. Last year only one refugee could enter India," said sources.
Moreover, China wants to gain a foothold in South Asia. Projects such as the Trans-Himalayan Railway and cross-border connectivity aim to integrate Nepal into China’s economy. Reopening of the Tatopani-Zhangmu and Rasuwagadhi-Kyirong border crossings, upgraded with Chinese funding, facilitate direct trade and movement.
China views Nepal as critical to securing its restive Tibet Autonomous Region. Close ties with Kathmandu help Beijing monitor Tibetan exiles and suppress activities. Nepal has repeatedly affirmed adherence to the ‘One China Policy’, cracking down on anti-China protests and Tibetan activism under diplomatic pressure.
Nepal joined the Belt and Road Initiative (BRI) in 2017, signing agreements for connectivity, energy, and infrastructure projects.
The Pokhra Airport was built with a $215-million Chinese loan. It has been criticised as a “white elephant" due to underuse and doubts about profitability.
While Nepal insists on “grant-based" rather than loan-heavy projects, concerns persist about unsustainable debt. The Budhi Gandaki Hydropower Project (1,200 MW) was initially awarded to a Chinese firm under controversial terms but later revoked due to public backlash over transparency and debt risks.
They are also aiming for soft power and cultural influence by opening up of institutions such as Confucius Institute. Media and information control is another area where Chinese have made huge investments in local Nepalese media.
Military aid and training is another crucial area where Chinese and Nepalese are working together. Chinese firms such as Huawei and ZTE are involved in installing Nepal’s telecom infrastructure, raising concerns about data security and espionage.
Nepal also actively seeks Chinese investment to address its infrastructure deficit and diversify partnerships beyond India, said sources.
Location : First Published:February 28, 2025, 14:27 IST
News world Nepal On FATF Grey List: Decoding China’s Role & How It Affects India | Exclusive
