Nepal-China Trade Slowdown: Handicraft and Carpet Exports Drop Significantly – NRB Mid-September Data

Nepal’s trade with China has slowed sharply in the early months of FY 2025/26, with exports recording a substantial decline, according to the Nepal Rastra Bank (NRB) Mid-September 2025/26 report. Total exports to China fell by 58.5%, amounting to just Rs. 123.5 million, compared to Rs. 297.5 million during the same period last year. The data reveals that key traditional Nepali exports — including handicrafts, woolen carpets, and readymade garments — have experienced notable drops due to weak Chinese demand and persistent logistical hurdles along the northern trade routes.

Exports of major commodities decreased by 38.9%, totaling Rs. 69 million, while other miscellaneous exportsplummeted by 70.5% to Rs. 54.5 million. The decline was led by metal and wooden handicrafts, which plunged by a staggering 91.3% to Rs. 1.7 million, marking one of the lowest levels in recent years. Similarly, woolen carpet exportsfell 36.6% to Rs. 20.8 million, reflecting lower luxury consumption in China’s post-pandemic market. Readymade garments also declined 36%, as smaller Nepali producers struggled to compete with mass-manufactured Chinese apparel.

Smaller traditional exports such as agarbatti (incense), rudraksha, and handmade craft goods recorded double-digit declines, highlighting the overall weakness in Nepal’s cottage and artisanal exports to China. Experts attribute these drops to sluggish consumer demand, border clearance delays, and rising transportation costs along the Rasuwagadhi–Kerung corridor, Nepal’s main northern trade route.

Amid the broad decline, a few items showed resilience. Pashmina exports rose 47% to Rs. 11.2 million, emerging as Nepal’s key export item to China. Similarly, readymade leather goods increased 46.4%, showing some demand for premium lifestyle products. However, these gains were insufficient to offset the overall contraction in total exports.

Economists emphasize that Nepal’s trade with China remains undiversified and fragile, dominated by a handful of traditional products and lacking modern market-oriented diversification. They recommend promoting value-added goods, improving border logistics, and establishing trade facilitation measures to rebuild momentum. Strengthening bilateral trade cooperation and digital customs processes could also help overcome structural bottlenecks that have long limited Nepal’s northern exports.