NRB Data: Nepal’s Trade with China Shrinks Sharply, Pashmina Up but Others Down

Nepal’s exports to China have experienced a significant downturn in the early months of FY 2025/26, according to the Nepal Rastra Bank (NRB) Mid-September 2025/26 report. The total value of exports to China plunged by 58.5%, dropping to just Rs. 123.5 million compared to Rs. 297.5 million during the same period of the previous fiscal year. This sharp contraction reflects weakened Chinese demand, continued logistical bottlenecks at the northern border, and a decline in Nepal’s traditional export competitiveness.

Exports of major commodities fell by 38.9% to Rs. 69 million, while other miscellaneous exports declined even more steeply—by 70.5% to Rs. 54.5 million. Most of Nepal’s key export products to China, including handicrafts, woolen carpets, and readymade garments, registered double-digit declines. Handicraft exports—particularly metal and wooden products—collapsed by 91.3%, falling to a mere Rs. 1.7 million, indicating a near halt in demand. Likewise, woolen carpets dropped 36.6%, and readymade garments fell 36%, reversing last year’s brief recovery. Exports of agarbatti, rudraksha, and other handmade goods also weakened substantially due to reduced orders and higher transport costs.

However, not all sectors performed poorly. Pashmina exports rose by an impressive 47%, reaching Rs. 11.2 million, fueled by demand from urban Chinese markets for luxury Nepali fabrics. Similarly, readymade leather goods increased 46.4%, indicating a small but growing niche for Nepali lifestyle exports. These gains, though limited, highlight that some specialized products continue to find traction despite broader trade challenges.

Experts suggest that the sharp overall decline is largely due to continued trade restrictions and inefficiencies along the Rasuwagadhi–Kerung route, which remains Nepal’s main gateway for goods to China. High transportation costs, slow customs clearance, and low post-pandemic consumer demand have all contributed to the trade slowdown. Moreover, Nepal’s export profile to China remains narrow and undiversified, making it vulnerable to small changes in demand patterns.

Economists recommend that Nepal prioritize export diversification, modern border infrastructure, and promotion of value-added goods to strengthen its foothold in the Chinese market. Products such as herbal goods, handmade pashmina, and processed agro-products hold significant untapped potential if backed by strong policy and logistics support.