The first major consignment of goods worth $2.8 million has left the Chinese border for Nepali capital of Kathmandu. This is the biggest goods movement between the two countries since 2005 when China built what it calls the Friendship Highway to link towns on two sides across difficult mountain terrain, observers said.

The move, which involves transporting goods of daily use, electronic and electrical appliances, will severely hit Indian businesses which had unfettered access to the Nepali market for decades. Dozens of trucks set off from the Tibetan border port of Gyirong for Kathmandu, which is 860 km away, Chinese news agency Xinhua

said.

China has been actively encouraging Kathmandu to reduce Nepal's dependence on India for the supply of goods and services like energy and telecommunication since early this year.

Nepal signed an agreement with China on movement and exchange of containers a week ago. Last month, Nepali Telecom entered into a deal for use of Chinese telecommunication goods and facilities.

The flow of goods from China, its northern neighbour, will encourage Nepal to accept the Chinese offer for rail connectivity, observers said.

"Nepali Prime Minister Prachanda is encouraging this move because he wants to persuade Chinese president

Xi Jinping to visit Nepal. Such a visit will enhance his image," Pramod Jaiswal, senior fellow with the Institute of Peace and Conflict Studies told TNN.

"I think China also wants Prachanda to continue in the post for long. His rival, Sher Bahadur Deuba, recently attended a meeting in which the prime minister of the Tibetan government in exile was present. China would not have liked this at all," Jaiswal said.

The consignment of shoes, cloths, hats, furniture, kitchen utilities, appliances and building material has already traversed a 5,200-km long journey by train from the south Chinese province of Guangdong to the Tibetan city of Xigeze before they were