Image: Reuters
In the 1960s China was poorer than Nepal. Today it has become the world’s second-largest economy with inflation-adjusted income per person of over $13,000, versus Nepal’s $1,179.
Chinese cities hum with bullet trains and its factories make everything from smartphones and electric vehicles to solar panels. The scale of that transformation is easy to admire and hard to imitate. Yet China’s economic model offers practical lessons for smaller countries still climbing the development ladder. Nepal, which frets about migration, imports and a chronic shortage of jobs, has reason to pay attention.
The first lesson is that prosperity begins with power—literally. China’s industrial rise rested on an abundant and reliable supply of electricity. Over the last 25 years it built more power plants than any other country and strung them together with long-distance transmission lines. That steady energy supply allowed its factories to hum and its cities to expand. Nepal, blessed with rivers but starved of infrastructure, still treats hydropower as an export commodity rather than the foundation of its own industrial base. A domestic manufacturing revival means not more dams alone, but a grid that can store, transmit and distribute power cheaply across the country.
The second is that roads, ports and digital networks are not luxuries: in fact they are multipliers of productivity. China’s decision to pour money into highways and high-speed railways connected workers to firms and firms to markets. Equally crucial was its digital leap: widespread mobile connectivity turned the internet into an economic engine, linking small producers to buyers and payments systems. Kathmandu, where potholes outnumber pavements and data costs remain high, lacks both the physical and digital arteries that bind modern economies together. Building them is slow and politically unrewarding, but nothing else raises productivity faster.
Third, China built machines but also know-how. Its manufacturing workforce—70m strong—became the world’s best school of process knowledge: the tacit understanding of how to make, fix and improve things. That experience compounds, much like capital does. Nepal’s education policy, by contrast, produces graduates trained to leave. A strategy to retain and retrain workers (technicians, mechanics, and engineers) would be as valuable as any new factory.
Fourth, China treated industrial policy as a long game. The state did not simply pick winners; it invested in the deep infrastructure that made winning possible. Subsidies, cheap credit and tax breaks were messy and tended to be wasteful; yet they created scale and coordination in key sectors. Nepali policymakers tend to equate industrial policy with protectionism or cash incentives for investors. In fact, it is the patient creation of systems (skills, logistics, standards, finance and so on) that let industries take root.
Fifth, innovation followed imitation. China’s early factories assembled foreign designs and copied Western products. Over time, familiarity bred originality. Firms such as Huawei and BYD emerged from that dense ecosystem of imitators. Nepali business culture prizes trading over making and importing over inventing. Yet small industries such as textiles, agro-processing and electric assembly could serve as training grounds for local ingenuity if the state backed them with credit and demand.
Sixth, the government learned to tolerate waste as the price of scale. Overbuilding solar factories or subsidising too many carmakers looked foolish, until competition drove costs down for the world. Nepal’s politics, obsessed with fiscal prudence, rarely allows similar experimentation. Some misallocation is inevitable when a country is building capacity from scratch; the real test is whether lessons are learned and excess eventually pruned.
The seventh lesson is cautionary. China’s heavy-handed control over private enterprise, and its neglect of the service sector, have lately dampened growth. Factories prosper but households save nervously. Nepal, already over-regulated, should heed this risk. Entrepreneurs thrive on predictable rules and light-touch oversight. The state’s role is to build roads and grids, rather than to hover over shop counters.
Finally, China’s success stemmed from national purpose. Industrialisation was a state mission. Each five-year plan aimed at technological self-sufficiency. Nepal’s policymaking, by contrast, drifts from budget to budget, hostage to coalition deals and donor fashions. Without a clear and shared vision—what kind of economy Nepal seeks to build—its many development plans will remain wish lists.
Nepal cannot, and should not, copy China. Its democracy is more open; its market is smaller; and its bureaucracy is less disciplined. But the bigger lessons hold: growth is engineered not wished for. It is a function of a government patient enough to invest in the foundations of productivity, and pragmatic enough to let private enterprise do the rest. China built its wealth by learning to make; Nepal could begin by learning to build. ■
Correction (November 11th 2025): An earlier version of this piece incorrectly said China’s real income per capita was more than $1,300. In fact it is more than $13,000. Sorry.
