Sinohydro Completes Vital Water Supply Project in Nepal Against Backdrop of Growing Political Closeness Between Beijing and Kathmandu

On July 5, China’s state-owned Sinohydro Corporation completed a major milestone in its ongoing implementation of the $800 million Melamchi Water Supply project in Nepal – the country’s largest-ever infrastructure initiative that aims to supply 170 million liters of drinking water per day, to Kathmandu, which suffers from a chronic water shortage.

The Chinese firm completed construction of a critical, 27.5‑km tunnel through which glacier water from Nepal’s Langtang National Park will flow to the capital city.  Following several delays due to technical and political issues, the project is now expected to be operational by the end of the year — although earlier, in June 2020, there was expectation that the project’s delivery timeline would be delayed.

The milestone completion is noteworthy in the context of China’s growing push to forge closer ties with Kathmandu, countering India’s influence in the country.  From India’s perspective Nepal is a critical buffer state against China. Some in New Delhi view recent border tensions with Nepal as part of China’s proxy strategy in South Asia to pursue further sovereign land encroachments and influence in the region.

Chinese foreign direct investment in Nepal has steadily risen in the past decade, reportedly accounting for more than 90% of Nepal’s total FDI in the 2019–2020 fiscal year.