China has announced that it will provide 100% duty-free access to goods from all least-developed countries (LDCs) with diplomatic ties to China, effective from December 1. The Customs Tariff Commission under China’s State Council made this decision, which was initially revealed at the China-Africa Summit in September.
While the initiative is now effective as of December 1, experts and government officials in Nepal argue that the timing offers limited benefits to the country. Nepal is set to graduate from LDC status in 2026, which will end its eligibility for the facility unless further agreements are made.
“After Nepal’s upgrade, the duty-free facilities it is receiving in China as an LDC will be lost,” said Paras Kharel, executive director of South Asia Watch on Trade, Economics, and Environment (SAWTEE). “I am not aware of any decision by China to extend this facility to countries upgraded from LDC status.”
Unlike China, the European Union and the UK have stated they will continue providing duty-free access for at least three years after Nepal’s LDC graduation.
Experts doubt Nepal can fully leverage this facility. Despite Chinese policies granting zero-duty access to 98% of goods from 16 LDCs, including Nepal, the country's exports to China remain negligible.
Nepal exported goods worth Rs 2.59 billion to China in the last fiscal year (FY 2023/24), while imports from China surpassed Rs 298.77 billion, according to the Trade and Export Promotion Center. Of the 200 types of goods exported to China in 2022, 86% were already duty-free, accounting for 93% of export revenue.
“Non-tariff barriers, rather than customs duties, limit exports to China,” Kharel explained, pointing to Nepali exporters’ struggles with standards and technical regulations. He also highlighted weak manufacturing capacity, inadequate quality control infrastructure, poor trade logistics, and limited understanding of the Chinese market as critical obstacles.
Payment issues due to the absence of Chinese bank branches in Nepal further compound the challenges. Kharel emphasized that improving production quality and supply capacity is essential for Nepal to benefit from China’s duty-free policy.
Joint Secretary Baburam Adhikari of the Ministry of Industry, Commerce, and Supplies acknowledged these issues. “The main problem for exports to China is the lack of trade infrastructure and insufficient goods for export. China is ready to buy, but we must meet their quality and standards,” he said.
Former Nepali Ambassador to China Bishnu Pukar Shrestha expressed optimism about maintaining the facility through bilateral discussions. “China is open to continuing duty-free access for Nepal,” he said.
Despite China’s expanded duty-free policy, Nepal’s ability to benefit hinges on addressing non-tariff barriers and enhancing trade infrastructure and production capacity.
