Nepal’s Exports to China Fall 58.5% in FY 2025/26 – Major Handicraft and Carpet Decline

Nepal’s trade data from the Nepal Rastra Bank (NRB) Mid-September 2025/26 report reveals a steep fall in exports to China, reflecting one of the sharpest declines in bilateral trade in recent years. Total exports to China during the first two months of the current fiscal year stood at Rs. 123.5 million, down by 58.5% compared to Rs. 297.5 million during the same period of FY 2024/25.

Sharp Drop in Major Commodities

Exports of major commodities fell by 38.9%, totaling just Rs. 69 million, while the category of “Others” dropped by 70.5% to Rs. 54.5 million. Traditional Nepali exports to China — including handicrafts, woolen carpets, and garments — have all faced notable contractions amid subdued Chinese demand and slower logistics through northern border checkpoints.

Key Declines

• Handicrafts (Metal & Wooden) fell drastically by 91.3%, down to Rs. 1.7 million, one of the worst performances in a decade.

• Woolen Carpet exports plunged 36.6%, dropping to Rs. 20.8 million, highlighting weaker consumer demand for high-end handmade goods in China.

• Readymade Garments decreased 36% to Rs. 24.6 million, reversing last year’s 119% surge.

• Agarbatti (Incense) exports dropped 42%, while Rudraksha and other handicraft goods also saw negative growth.

Bright Spots

Despite the overall downturn, a few commodities managed to register growth:

• Pashmina exports increased 47% to Rs. 11.2 million, reflecting niche luxury demand from urban Chinese markets.

• Readymade Leather Goods rose 46.4%, albeit from a small base, signaling early signs of revival in lifestyle products.

• Noodles saw positive momentum last year (+51.8%), though exports remained minimal this year.

Trade Context and Challenges

Analysts attribute the sharp decline in exports to persistent border logistics constraints, reduced Chinese import orders, and slow recovery in the Chinese consumer market. The Rasuwagadhi–Kerung trade route, Nepal’s main gateway for exports to China, continues to operate below capacity due to administrative and technical barriers.

Furthermore, the decline in handicraft and carpet exports points to deeper structural issues — limited production competitiveness, rising costs, and lack of product diversification targeting modern Chinese retail trends.

Outlook

While Nepal’s exports to India have surged by 140%, the sharp drop in trade with China underscores the country’s imbalanced trade orientation and overdependence on a few regional markets. Policymakers are now urged to reinvigorate Nepal–China trade ties through infrastructure enhancement, digital trade facilitation, and market access agreements for Nepali artisanal and agricultural products.