By Nirmal P. Acharya

In the 21st century, foreign policy is increasingly shaped not only on words or weapons, but by roads, bridges, water, ports, power grids, and internet. Infrastructure is essential for the foundation for economic growth, social development, and poverty reduction.   

While, the US has historically focused less on hard infrastructure and more on governance, health, education, and capacity building often through institutions like USAID, MCC, and World Bank. China’s infrastructure push is anchored in its ambitious Belt and Road Initiative (BRI), launched in 2013. With over $1 trillion pledged, BRI aims to build a modern Silk Road—a network of roads, railways, ports, pipelines, and digital infrastructure connecting Asia, Africa, and Europe.

Both the US and China are vying for global influence through what experts call “infrastructure diplomacy”. However, there has been a spectacular transformation in the global diplomacy of foreign aid as China has moved from being a recipient of aid to being one of the largest donor states in international development, strategically positioning itself as the most credible challenger to the dominance of the US.

The US invests in global development through grants, technical assistance, and private sector mobilization, focusing on governance, sustainability, and democratic values. Key investments include $498M in Ghana, $600M in Senegal, $375M in Benin for infrastructure and energy under MCC; $500M in Nepal for roads and electricity; and $1B via the DFC for Eastern Europe’s energy and digital networks under the Three Seas Initiative. Globally, the US aims to mobilize $600B by 2027 through the Partnership for Global Infrastructure and Investment (PGII), while also promoting high-quality, transparent projects through the Blue Dot Network.

China’s global investment strategy focuses on rapid, large-scale infrastructure development through state-backed loans and Chinese contractors, with a strong emphasis on strategic trade routes and resource access. Key investments include $60B in the China–Pakistan Economic Corridor (CPEC), $6B each for the Jakarta–Bandung High-Speed Rail in Indonesia and the Lao–China Railway, and $3.2B for the Mombasa–Nairobi Railway in Kenya. Other key projects include the $2.9B Budapest–Belgrade Railway in Europe, $2.7B Coca Codo Sinclair Dam in Ecuador, $5B for rail upgrades in Argentina, and $1.5B for Nigeria’s Lagos–Ibadan Railway. Additionally, through the Digital Silk Road, China is deploying 5G, fiber networks, and surveillance systems in over 60 countries, expanding its digital and geopolitical influence alongside physical infrastructure.

However, as of mid-2025, the US has effectively dismantled key foreign aid agencies, with USAID largely merged into the State Department and over 80% of its programs terminated, resulting in significant cuts to global health, infrastructure, and governance projects. The MCC fears facing shutdown, with funding freezes impacting ongoing compacts in countries like Nepal and Senegal. Although MCC projects in Nepal are not cancelled but are effectively paused, awaiting US policy signals, but if MCC operations continue to shrink, Nepal may face serious delays or even need to finance the projects independently.

The infrastructure competition between the US and China is not just about roads or railways, it’s about who shapes the future of the developing world. China builds fast and at scale. The US emphasizes sustainability, standards, and sovereignty. Nepal, nestled in the heart of South Asia, is often romanticized for its majestic Himalayas, spiritual heritage, and natural beauty. But beyond the breathtaking landscapes lies a geopolitical goldmine- a location that, if wisely used, can become the engine of Nepal’s long-term economic development. Below are some strategic approaches on how Nepal can benefit from the International Diplomacy:

1. Geopolitical Leverage

  • Nepal is sandwiched between two giants: China to the north and India (a close US ally) to the south. This gives it unique geopolitical importance.
  • Both the US and China may seek to increase their influence in Nepal to counterbalance each other.
  • Nepal can use this to negotiate better terms for aid, investment, and trade agreements from both sides.

2. Infrastructure & Investment

  • China's BRI (Belt and Road Initiative): Nepal is a signatory. China has funded roads, hydro, and transport corridors.
  • The US’s MCC (Millennium Challenge Corporation): Offers a $500 million grant for energy and road infrastructure.
  • Nepal can accept infrastructure support from both while ensuring sovereignty and transparency in agreements.

3. Tourism and Education

  • Promote Nepal as a neutral, peaceful destination for eco-tourism, meditation, trekking, and culture.
  • Attract Chinese tourists and students and American educational partnerships, including scholarships and university collaborations.

4. Digital Diplomacy and Technology

  • Nepal can request 5G, AI, or cyber security support from both sides.
    • China might offer Huawei-based infrastructure.
    • The US might offer Open RAN-based alternatives.
  • Nepal can benefit by diversifying its technology providers, avoiding over-reliance on either side.

5. Trade Diversification

  • Currently, Nepal relies heavily on India and China for trade. It can:
    • Use US trade preferences (like GSP, if renewed) for garment exports.
    • Use Chinese rail/road access via Tibet to reach Central Asia and Europe.
  • Negotiate bilateral or multilateral trade agreements to expand its market base.

6. Climate and Environment Funding

  • Both China and the US are climate superpowers.
  • Nepal, as a vulnerable Himalayan nation, can attract climate resilience funding from both:
    • The US via USAID, World Bank climate funds.
    • China via the Green Silk Road or South-South Cooperation programs.

7. Neutral Mediation Role

  • Nepal can present itself as a neutral ground for diplomacy, much like Switzerland or Finland historically.
  • Hosting regional or international peace dialogues enhances soft power and international visibility.

What Nepal Should Be Careful About

  • Avoid becoming a pawn: Playing one side too openly can backfire. Nepal must maintain a balanced foreign policy.
  • Ensure transparency and accountability in foreign-funded projects to avoid corruption or dependency traps.
  • Stay non-aligned formally, even while engaging economically and strategically.

Nepal should leverage both superpowers: take Chinese roads or power plants while working with the US for transparency, energy reform, and climate tech and use geography and diplomacy to attract high-quality, debt-safe, and locally empowering infrastructure. However, in this global game of concrete and influence, developing nations must be players, not pawns.