The Pulse | Economy | South Asia

Nepal’s Floods Upset Its China-India Balancing Act

Trade infrastructure was swept away. Nepal’s trade with China, which was already limited, will be further restricted after the August 26 floods.

A massive flood in the Bhotekoshi River affected riverbanks and nearby houses in Nuwakot, Nepal, causing widespread damage to homes, roads, bridges and other infrastructure in the area, Aug. 28, 2026.

Nepal’s recent floods, which have killed at least 1,280 people while over 5,600 are still missing as of this writing, rank among the country’s worst natural disasters. Preliminary estimates put economic losses at $2.56 billion. But the disaster’s consequences will extend far beyond the immediate human and economic toll.

It has also undermined the efforts of successive post-2015 governments to achieve more geopolitical balance, largely through the development of new transport, trade and transit facilities with China.

As a landlocked country wedged between India and China, Nepal has long sought to preserve its strategic autonomy by balancing the influence of its two neighbors.

For a variety of reasons, India, which surrounds the country on three sides, has blockaded its open border with Nepal three times since 1969 — most recently in 2015. That year, Nepal promulgated a new constitution that had failed to address India’s concerns. At other times, New Delhi has openly meddled in Nepali politics.

To reduce that vulnerability to Indian pressure, Nepali rulers have felt the need to increase engagement with China, the northern neighbor.

After the 2015 blockade, the then-K.P. Sharma Oli government signed a slew of agreements with China to establish new trade and transit links. As part of the process, a significant investment was made to upgrade the Kerung border point (known as Gyirong on the Chinese side) into an all-weather international crossing. Much of China-Nepal trade has gradually shifted to Kerung from Tatopani, the previous main artery of bilateral trade that was badly damaged by the 2015 earthquakes.

Unfortunately, the recent floods literally washed away much of the investment around Kerung. There is not even a trace of the customs buildings and customs yards — on either side of the border.

After the flooding of the Kerung border, China has also shut down Tatopani, citing possible landslides on the Nepali side. (Beijing has also long been wary of the possible use of the Tatopani route by “Free Tibet” activists.) All cross-border traffic has been diverted to Korala, the third international border crossing between Nepal and China. But Korala is not an easy crossing, nor is there much in terms of cross-border trade infrastructure. Besides these three, the three other designated points for Nepal-China trade are minuscule and limited to handling local trade.

In the big picture, Nepal’s trade with China, which was already limited, will be further restricted after the........

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