China waded into the political debate in Kathmandu whether Nepal should accept the Millennium Challenge Corporation (MCC) grant, a USD 500 million developmental assistance from the USA and made loaded comments to suggest that Nepal should reject the offer from the USA however these plans by China went awry. China is pursuing coercive wolf warrior diplomacy under the leadership of President Xi Jinping. However, with the Parliament of Nepal ratifying the Millennium Challenge Corporation deal, the Chinese persuasion to stop Kathmandu from availing of USD 500 million developmental assistance from the USA has failed. The strategy of China to browbeat Nepal into submission has been of no avail. In 2017, Nepal and the USA signed the Millennium Challenge Corporation (MCC) deal, meant for building infrastructure in Nepal such as electricity transmission lines and improvements in the national highways. Protests believed to have been engineered by China, however, delayed the ratification of the project in the Parliament of Nepal indefinitely. The USA had set a deadline of February 28, 2022, for Nepal to accept the project. Former Nepal Prime Minister K. P. Sharma Oli's party Communist Party of Nepal (Unified Marxist Leninist) opposed tooth and nail to block the passage of the project in Parliament, but all other political parties of Nepal united to defeat the opposition of CPN (UML) and ratified the project on February 27 in a session of Parliament that continued till late in the evening. In his tenure as Prime Minister K. P. Sharma Oli is known to have pursued blatantly pro-China policies, to the detriment of the interest of the people of Nepal.
"Beijing is glad to see international assistance to Nepal but it should come without any political strings attached. We oppose coercive diplomacy and an agenda based on selfish interests at the expense of the sovereignty of other countries," spokesman of Chinese Foreign Ministry Wang Wenbin said in Beijing on February 18; ironically, in a blatant exhibition of coercive diplomacy by China itself. Some of the political parties in Nepal had raised the objection that that MCC grant was a part of the Indo - Pacific strategy; under which the USA wants to ensure freedom of navigation under international rules of navigation, and break the hegemony that China wants to establish in the South China Sea, Taiwan Straits and other channels of navigation in the region. Significantly, two of the main communist parties in Nepal, the CPN (Maoist Centre), led by Prachanda, and CPN(Unified Socialist), led by Madhab Kumar Nepal, had decided to withdraw their protests against the MCC grant before it was tabled in Parliament; but CPN (UML) continued to protest till the passage of the grant in the floor of Parliament. The U. S. authorities have, however, clarified that MCC is not a part of the American government but an independent U. S. foreign aid agency that helps developing countries to fight against poverty through economic development. MCC forms partnerships with some of the world's poorest countries, but only those committed to good governance, economic freedom and investments in their citizens. Nepal was selected for assistance under MCC because of its commitment to these attributes. In 2013-14, MCC concluded that energy and transport sectors were the two major binding constraints for higher economic growth in Nepal. The "Compact Program" was signed in Washington between Nepal and MCC in September 2017. The USD 500 million grant would go to construct about 300 kilometres of 400 KV transmission lines along with three sub-stations and maintenance of about 300 kilometres of roads in various alignments. The U. S. has also repeatedly clarified that the MCC project had no military component, it predated the evolution of the Indo - Pacific strategy; and was initiated at the request of the Nepal government, with the support of all the political parties of Nepal. The United States also believed that China had encouraged a disinformation campaign against the USD 500 grant from the USA for Nepal.