Nepal’s Export to China Down 39% in 2025/26; Pashmina Remains Key Export Item

Nepal’s trade performance with China has weakened notably in the first two months of FY 2025/26, as exports fell by 38.9% compared to the same period last year, according to the Nepal Rastra Bank (NRB) Mid-September 2025/26 report. Total exports of major commodities reached only Rs. 69 million, down from Rs. 113 million during the same period of FY 2024/25. The sharp contraction highlights a persistent slowdown in demand for Nepali traditional goods such as handicrafts, carpets, and garments, while a few high-end products like pashmina continued to perform relatively well.

The decline was widespread across several key categories. Metal and wooden handicrafts plunged by 91.3%, recording just Rs. 1.7 million in export earnings — one of the steepest drops in recent years. Similarly, woolen carpet exportsdecreased by 36.6% to Rs. 20.8 million, reflecting reduced Chinese luxury consumption and competitive domestic production in China. Readymade garments also fell sharply by 36%, while rudraksha, agarbatti, and other handicraft items showed double-digit declines due to low market demand and high logistics costs.

Despite the overall decline, pashmina emerged as a bright spot. Exports of pashmina increased by 47%, reaching Rs. 11.2 million, becoming Nepal’s key export item to China this year. The growth reflects continued demand for high-quality Nepali wool in Chinese urban centers, driven by fashion and luxury retail segments. Readymade leather goods also saw a modest rise of 46.4%, signaling potential in Nepal’s small but growing leather and lifestyle goods sector.

Analysts point to multiple causes behind the downturn in exports to China. Persistent border bottlenecks at Rasuwagadhi–Kerung, rising transportation costs, and sluggish post-pandemic recovery in Chinese consumer spending have all contributed to the drop. Moreover, Nepal’s export basket to China remains highly concentrated and undiversified, making it vulnerable to small market shocks.

Experts emphasize that Nepal needs to diversify its export base by promoting value-added agricultural, herbal, and handmade products, enhancing trade infrastructure, and improving customs efficiency to regain momentum in the Chinese market. Stronger bilateral trade facilitation and targeted market promotion could help revive exports in the coming quarters.