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Amid reports of serious impacts on critical sectors such as health and education in developing and least-developed countries following cuts in U.S. aid, senior State Department officials have said that Washington has not pulled back assistance but is instead recalibrating it.

Speaking at a conference on U.S. foreign assistance in the Indo-Pacific held in Washington, the officials said the United States continues to provide support in the Indo-Pacific region in line with U.S. national security interests and President Donald Trump’s foreign policy priorities.

Allison Hooker, U.S. Under Secretary of State for Political Affairs, said the administration’s aid strategy in the region represents a calibration, not a pullback. “The U.S. is a Pacific power, and the future of the Indo-Pacific is directly tied to our core national interests,” she said, highlighting that Washington’s commitment to the Indo-Pacific remains unwavering.

In his second term as president, the Trump administration dismantled the U.S. Agency for International Development (USAID), a move that has stressed the health and education systems of scores of countries that had long relied on American aid.

“Our foreign assistance needs to be a force multiplier as we safeguard our national security with the greatest military in the world, along with our allies and like-minded partners,” Hooker said.

Speaking at the same conference, Assistant Secretary of State for East Asian and Pacific Affairs Michael DeSombre said, “We never got out of the foreign assistance business as some media narratives have claimed. During the review period of foreign aid, however, we saw an opportunity to fundamentally reimagine how foreign assistance is done, which required us to step back and examine the underlying principles that would guide our work.”

The resulting principles, he said, form a strategic framework aligned with the core tenets of the National Security Strategy and will guide U.S. efforts to ensure programs remain focused and effective. The statements by senior officials clearly indicate that the U.S. will continue to provide support in selective and narrow areas that align with its national interests.

The Trump administration issued a new National Security Strategy in November that places the Indo-Pacific region high on its list of priorities.

The document states: “The Indo-Pacific is already the source of almost half the world’s GDP based on purchasing power parity (PPP), and one third based on nominal GDP. That share is certain to grow over the 21st century, which means the Indo-Pacific is already—and will continue to be—among the next century’s key economic and geopolitical battlegrounds.”

“To thrive at home, we must successfully compete there—and we are,” the document says, noting that President Trump signed major agreements during his October 2025 travels that further deepened ties in commerce, culture, technology, and defense, reaffirming U.S. commitment to a free and open Indo-Pacific.

The strategy also emphasizes improving commercial and other relations with India to encourage New Delhi’s contribution to Indo-Pacific security, including continued quadrilateral cooperation with Australia, Japan, and the United States under the “Quad.” It further states that the U.S. will work to align the actions of its allies and partners to prevent domination by any single competitor nation.

In Nepal, as in other countries, more than 80 percent of USAID assistance has been cut, though Millennium Challenge Corporation (MCC) investments have continued. Nearly a year after Trump returned to power, no senior U.S. officials have visited Nepal, even as there have been frequent visits to other smaller South Asian countries, notably Bangladesh, Sri Lanka, and Pakistan. Similarly, following the Gen Z movement, the U.S. has maintained a low-key profile in Nepal.

After years of tension and hostility, India and China are slowly moving toward rapprochement, signaling a potential shift in the geopolitical landscape of the Indo-Pacific region. Their recent interactions, notably during the Shanghai Cooperation Organization (SCO) summit in Tianjin, China, are being closely observed not only across South Asian capitals but also in Western capitals, particularly Washington, DC.

On Aug 31, Indian Prime Minister Narendra Modi met Chinese President Xi Jinping on the sidelines of the SCO summit. This marked one of the highest-level engagements between the two nations since their last meeting in Kazan in Oct 2024. The deadly Galwan Valley clash in 2020 had severely strained bilateral ties.

During the meeting, both leaders acknowledged the progress made in stabilizing their relationship and expressed intent to build on this momentum. A particularly sensitive area—the long-standing border dispute—was a focal point. Modi noted that after the disengagement along certain friction points at the Line of Actual Control (LAC), an “atmosphere of peace and stability” had emerged. He further stated that special representatives from both countries had reached an agreement on enhanced border management.

Chinese President Xi emphasized that both sides should not let boundary issues define the overall relationship. He advocated for stronger bilateral cooperation and said, “It should be the right choice for China and India to be good-neighborly friends and partners that help each other succeed, and have the dragon and the elephant dance together.”

The ‘Dragon and Elephant’ metaphor has been previously invoked by Chinese officials, including Foreign Minister Wang Yi, who in March this year described it as the only correct strategic choice for both sides.

The Galwan Valley clash of June 2020 was the most serious military confrontation between India and China since the 1962 war, resulting in casualties on both sides. The incident led to a rapid deterioration in diplomatic, economic, and people-to-people ties. In the aftermath, direct flights between the two countries were suspended, the Kailash Mansarovar Yatra was halted, and economic cooperation was curtailed.

However, signs of normalization have begun to appear. Both the Kailash Mansarovar Yatra and direct air travel between New Delhi and Beijing are set to resume, signaling a renewed interest in rebuilding trust.

The rapprochement comes at a time when both countries are facing economic headwinds—partly due to external pressures such as the US trade war. US President Donald Trump’s administration has imposed steep tariffs on Chinese goods and extended similar measures to India, further complicating relations with both Asian powers.

As economic nationalism and protectionism rise in the West, India and China are increasingly turning to each other—not out of mutual affection but pragmatic necessity. Both countries are exploring expanded market access, supply chain integration, and greater cooperation in global governance.

At the SCO summit, Modi emphasized the importance of the bilateral relationship, stating, “Cooperation between our two countries is linked to the interests of 2.8bn people. This will also pave the way for the welfare of all humanity,” he said. Despite the warming tone, deep strategic divergences remain, particularly in the Indo-Pacific region. India is a key member of the Quad alliance, along with the US, Japan, and Australia. The group aims to promote a free, open, and rules-based Indo-Pacific, which Beijing perceives as an anti-China bloc.

India has also rejected China’s Belt and Road Initiative (BRI) on grounds of sovereignty and transparency—especially given that the China-Pakistan Economic Corridor (CPEC), a flagship BRI project. Moreover, India remains wary of China’s growing influence in South Asia, particularly in countries like Sri Lanka, Nepal, and the Maldives, where Beijing has invested heavily under its regional outreach strategy.

Despite these regional tensions, both countries continue to collaborate on global platforms. India and China are active participants in BRICS—a bloc that includes Brazil, Russia, and South Africa—which aims to offer an alternative to Western-dominated institutions. Discussions are ongoing about introducing a BRICS currency, although differences between India and China on implementation persist.

In their statements, both leaders recognized their roles as ancient civilizations, populous nations, and key voices of the Global South. They pledged to continue cooperation in multilateral frameworks on issues like climate change, sustainable development, and global economic governance.

India-China relations have seen cyclical highs and lows since they established diplomatic ties in 1950. Major milestones include Indian Prime Minister Rajiv Gandhi’s landmark visit to China in 1988, and Chinese President Xi’s visit to India in 2014, followed by reciprocal visits and two informal summits in 2018 (Wuhan) and 2019 (Chennai). These engagements laid the groundwork for what was once seen as a promising new phase in bilateral ties.

However, the Galwan clash derailed much of that progress. Now, with global realignments and economic shifts, both countries appear to be reassessing their strategic calculus. The recent SCO declaration also criticized unilateral economic measures—widely interpreted as a rebuke of the West’s use of tariffs and sanctions. 

“Member States oppose unilateral coercive measures, including those of an economic nature, that contravene the UN Charter… negatively affecting the global economy, undermining fair competition, hindering international cooperation and the achievement of the UN Sustainable Development Goals,” the declaration states.

The meeting between Modi and Xi in Tianjin symbolizes a cautious thaw between two regional heavyweights who have more to gain from cooperation than conflict. Yet, while economics may bring them closer in the short term, deep-seated geopolitical differences will continue to shape the trajectory of the India-China relationship. Whether the dragon and the elephant can truly dance or merely avoid stepping on each other’s toes remains one of Asia’s most critical strategic questions.

Prime Minister KP Sharma Oli is travelling to China to attend the Shanghai Cooperation Organization (SCO) Summit, an intergovernmental regional body founded in 2001 in Shanghai. Nepal, currently a dialogue partner, will participate in the summit scheduled for Aug 31–Sept 1 in Tianjin, China.

On the sidelines, Oli is expected to hold bilateral meetings with SCO leaders, including Chinese President Xi Jinping and Indian Prime Minister Narendra Modi. This year’s SCO summit brings together Modi, Xi, and Russian President Vladimir Putin at a time when US-India ties have soured over tariffs imposed by US President Donald Trump. Western countries will be closely watching as three major non-Western powers meet to discuss bilateral, regional, and global issues.

For Oli, however, the Lipulekh dispute is likely to dominate his agenda. India and China recently agreed to resume trade through the Lipulekh pass, a territory disputed between Nepal and India, placing Oli under pressure to raise the issue with both leaders. Although Nepal is reported to have sent diplomatic notes to New Delhi and Beijing expressing its displeasure, the government has not made any official statement, and Oli himself has remained silent on the matter.

Beyond the dispute, Nepal is lobbying to upgrade its status from dialogue partner to full SCO membership. At a time when both SAARC and BIMSTEC are becoming ineffective, SCO could be a new regional platform to advance its voices in the global arena. Government sources suggest the summit may decide on granting membership to Nepal and other applicants. Full membership would allow Nepal to deepen cooperation in trade, transit, energy, agriculture, investment, security, and cultural exchanges with SCO members. 

Nepal became a dialogue partner in March 2016 after signing an MoU with the SCO Secretariat, nearly a decade after applying for the status in 2007. According to the Ministry of Foreign Affairs, the MoU defines scope of Nepal’s engagement with SCO in the field of trade, transit and investment, energy, agriculture, small and medium business, security issues, and legal and custom affairs, among others. Since 2016, Nepal has participated in multiple SCO meetings, including a briefing for dialogue partners in April this year attended by Nepal’s embassy representatives.

The Tianjin summit, expected to be the largest in SCO’s history, will host leaders from over 20 countries and 10 international organizations. According to Xinhua, the summit will issue declarations marking the 80th anniversary of the UN and the victory in the World Anti-Fascist War, and adopt outcome documents on security, economic cooperation, and cultural exchange.

The SCO traces its roots to the 1996 “Shanghai Five” mechanism, when China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan sought to resolve border security issues after the Cold War. Over the past two decades, trade among SCO members has grown nearly 100-fold, with their share of global trade rising from 5.4 percent in 2001 to 17.5 percent in 2020.

This year’s attendees include Russian President Putin, Belarusian President Alexander Lukashenko, Indian Prime Minister Modi, Iranian President Masoud Peseshkian, Kazakh President Kassym-Jomart Tokayev, Kyrgyz President Sadyr Japarov, Pakistani Prime Minister Shahbaz Sharif, Tajik President Emomali Rahmon, Uzbek President Shavkat Mirziyoyev, and Mongolian President Ukhnaagiin Khurelsukh.

Also attending are Azerbaijan’s President Ilham Aliyev, Armenian Prime Minister Nikol Pashinyan, Cambodian Prime Minister Hun Manet, Maldivian President Mohamed Muizzou, Nepali Prime Minister KP Sharma Oli, Turkish President Recep Tayyip Erdogan, Egyptian Prime Minister Mostafa Madbouly, Turkmen President Serdar Berdymuhamedov, Indonesian President Prabowo Subianto, Lao President Thongloun Sisoulith, Malaysian Prime Minister Anwar Ibrahim, and Vietnamese Prime Minister Pham Minh Chinh.

Currently, the SCO has 10 full members—Belarus, India, Iran, Kazakhstan, Kyrgyzstan, China, Pakistan, Russia, Tajikistan, and Uzbekistan. Afghanistan and Mongolia hold observer status, while 14 countries, including Nepal, are dialogue partners.

According to the Ministry of Foreign Affairs, Oli will also take part in the commemoration of the 80th anniversary of the victory of the Chinese People’s war on resistance against Japanese aggression and world anti-fascist war. PM Oli will address the SCO plus Summit in Tianjin on 1 September. Oli will also meet Chinese Prime Minister Han Zheng and vice president on September 2. Nepali Congress leader Purna Bahadur Khadka and some ministers are accompanying PM Oli. 

Five years after the deadly clashes in the Galwan Valley that severely strained ties, India and China now appear to be moving toward normalization of relations.

While the US President Donald Trump’s tariff war may have nudged the two Asian powers closer, the current thaw stems largely from sustained confidence-building measures and dialogue. For Kathmandu, cordial relations between India and China create a more favorable environment to engage constructively with both New Delhi and Beijing.

On both the Doklam and the Galwan clashes, Nepal consistently maintained that disputes should be resolved peacefully. Following the Galwan incident, Nepal stated: “In the context of recent developments in the Galwan Valley area between our friendly neighbors India and China, Nepal is confident that both the neighboring countries will resolve, in the spirit of good neighborliness, their mutual differences through peaceful means in favor of bilateral, regional and world peace and stability.”

Over the past year, multiple rounds of dialogue helped rebuild trust. Chinese Foreign Minister Wang Yi visited India on Aug 18–19, where discussions included the sensitive border question. Earlier, in July, Indian External Affairs Minister S Jaishankar traveled to Beijing.

India has long maintained that relations cannot return to normal unless border issues are addressed. In delegation-level talks, Jaishankar remarked: “Having seen a difficult period in our relationship, our two nations seek to move ahead. This requires a candid and constructive approach from both sides. Overall, it is our expectation that our discussions would contribute to building a stable, cooperative and forward-looking relationship between India and China, one that serves both our interests and addresses our concerns.”

On the global context, he added: “We seek a fair, balanced and multi-polar world order, including a multi-polar Asia. Reformed multilateralism is also the call of the day. In the current environment, there is clearly the imperative of maintaining and enhancing stability in the global economy as well.”

Chinese Foreign Minister Wang Yi, for his part, urged both sides to draw lessons from the past, cultivate a correct strategic outlook, and view each other as partners and opportunities rather than rivals or threats. He emphasized confidence-building, expanded cooperation and consolidating positive momentum. Pointing to the US, Wang warned that “unilateral bullying practices are on the rise, while free trade and the international order face severe challenges.”

This thaw in India-China ties comes at a time when New Delhi’s relations with Washington have soured after Trump imposed an additional 25 percent tariff on Indian goods, citing India’s continued imports of Russian oil. Meanwhile, China and the US have been locked in a trade and technology war since 2018.

According to Kathmandu-based geopolitical analyst Chandra Dev Bhatta, shifting global geopolitics has compelled both India and China to temporarily set aside differences. “Both countries now recognize each other as competing powers, not necessarily the binary rivals often portrayed in Western media,” he said. “The backdrop to these developments is important for countries like Nepal. For instance, the Trump administration’s tariff measures against India for its Russian oil imports came despite the fact that most major countries were doing the same, something that actually helped stabilize the global oil market, benefiting even Nepal.”

Bhatta added that India and China have long learned from each other, and countries in between stand to benefit if ties continue to improve. Closer relations could generate alternative ideas for development and global governance.

Still, he cautioned that states prioritize their own interests, especially in times of heightened geopolitics. “We too must focus on our own interests and prepare to navigate accordingly,” he said. “There’s an old saying: whether elephants fight or make love, it’s the grass that suffers. It may be old, but it remains relevant when external factors increasingly shape regional relations.”