The half-built road to Lamabagar, a Nepalese farming village near the border with Tibet, has the feel of an active war zone. Clouds of rock explode from the cliffs as construction workers blast a path north toward the Tibet Autonomous Region of China. Porters lumber up the twisting Himalayan switchbacks with boxes of dynamite strapped to their heads. The road is meant to connect the district capital of Dolakha with a hydroelectric dam at the north end of the valley, though one day it may continue north, giving this Himalayan buffer state a vital new overland route to China. All the commotion is purposeful since Nepal is plagued by chronic electricity shortages, which the 456-megawatt plant, scheduled to open in 2014, is meant to address.

The Nepali crews that inch closer to China, bringing heavy trucks to a valley that has known only foot traffic, are at the forefront of a potentially major strategic shift in the region: Nepal, long a dependable ally and client of India, is building economic and political ties with China. Good roads are just one sign of this relationship and, as Rhoderick Chalmers, an International Crisis Group analyst in Kathmandu, explained to me, could “prevent India from using its ultimate sanction of economic blockade on Kathmandu.” If China can begin supplying many of the goods that Nepal now receives from India — especially petrol, diesel, and kerosene — then India’s leverage would be severely limited.

Although one new highway will not in itself push Nepal from India’s sphere of influence — history, economics, and above all, geography will see to that — the mere fact that India may one day have to compete for Nepal’s attention is a sign of Kathmandu’s political reorientation. In 2006, as Nepal’s monarchy teetered, Maoist leaders and pro-democracy parties signed a comprehensive peace agreement ending a decade-long civil war. Since then, Kathmandu has been building a nascent democracy while wedged in a proxy battle between China and India — with the United States and Europe watching closely.

For now, Nepal remains in an uncertain position. Rolling blackouts keep much of the country in the dark for up to 12 hours a day. Inflation and consumer prices have skyrocketed, rising 13 percent between 2008 and 2009. Food prices have been hit especially hard: the price of sugar, for example, nearly doubled from 50 rupees per kilogram (about 66 cents) in mid-2009 to 90 rupees (about $1.19) this past winter, no small sum in a country where 78 percent of the population lives on less than $2 a day.

Meanwhile, the country’s peace process is in tatters, with Maoist fighters having made veiled threats of returning to violence if they are not incorporated into the state structure. The current constitution will expire on May 28, and Nepal’s political parties will have to agree on a new one — a moment that many Nepalese hope will bring about political stability and economic growth. Newspapers in Kathmandu have taken to printing graphics that count down the number of days until May 28. Bipin Adhikari, a legal expert in Kathmandu, recently wrote in Himal Southasian magazine that nothing less than “a new Nepal” is at stake — one with adequate legal protections for minority groups, a new system of governance, and minimal ethnic or cultural discrimination. Economic prosperity, this thinking goes, will naturally follow.

Yet the country’s political parties appear more concerned with holding on to power than pushing real reform. As the May 28 deadline approaches, Maoist party chiefs are threatening to endorse their own constitution if not given a leadership role in a new national unity government. A weeklong Maoist-led strike to protest the current prime minister ended on May 8, but not before economic losses topped a quarter of a billion dollars, by some estimates. A report last February from the Carter Center argued that although Nepal’s “indigenous and marginalized” communities expect the new constitution to provide stability and to address basic needs, “national political parties remain largely inactive on constitutional issues at the local level.”

As a result, it appears almost certain that the constitutional drafting deadline will be missed, throwing the country into further disarray. For Nepal’s 29 million people, the stakes could not be higher. “This is the first time a representative body is drafting a constitution in Nepal,” said Surya Dhungel, a constitutional adviser to Nepal’s president. “We’re in the process of restructuring everything.”

A successful resolution of the peace process will be needed to make the political gains from a new constitution lasting. Disagreement over whether and how to incorporate Maoist rebels into the country’s security forces continues to divide the negotiating parties. In a speech in early March, B. Lynn Pascoe, the UN undersecretary-general for political affairs, criticized all sides for contributing to the stalemate. “Progress has slowed and unity has frayed,” Pascoe said. “The Nepali public has become impatient and disappointed, and the feeling is increasingly shared in the international community.”

As Nepal inches toward a draft constitution and lasting peace deal, it is counting on India, its longstanding patron and a fellow Hindu-majority state. New Delhi remains Kathmandu’s biggest supplier of essential goods, including gasoline, and the Nepalese are addicted to Indian films, music, and other forms of pop culture. Although new roads in Nepal’s northern reaches may one day extend the country’s economic linkages to China, for now the majority of all trade flows are to and from India in the south.

Yet, New Delhi’s self-interest may threaten the long-term health of the bilateral relationship. New Delhi is facing its own Maoist insurgents, in its eastern provinces, and may be more concerned with internal security than shoring up Nepal’s political dynamic. Some believe that India is withholding support for Nepal’s peace process in an effort to ensure that a Maoist-led government does not return to power and gain control of the military. During their brief rule in 2009, Maoist leaders expressed hostility toward India and made overt political overtures to China. The Maoists’ ties to Beijing “crossed India’s red lines,” argues the International Crisis Group, and this concern continues to drive New Delhi’s calculations. Indian diplomacy in Nepal is defined more by absence than interference, the ICG contends.

China, however, is not waiting for a new Nepalese government to emerge before engaging. Since 2008, when bloody protests erupted on the Tibetan plateau, China’s core interest in Nepal has been to minimize the political activities of Tibetan refugees living there, which China views as potential threats to its own security. Beijing has consistently linked economic and military aid to Kathmandu’s adherence to a “one China” policy, a thinly veiled reference to Nepal’s ban on political demonstrations by Tibetan exiles. As recently as March, China’s defense minister pledged additional military aid to Nepal following statements from Kathmandu reiterating the one-China commitment. Chinese officials have also called for increased security on Nepal’s side of the border to stem the flow of Tibetan refugees, including in the area of Lamabagar’s road project. Chinese diplomats are, according to a 2009 ICG report, “vocal, unsubtle and rigidly consistent” regarding Tibetans in Nepal. “Nepali governments of any political color have little choice but to bow to their powerful neighbor’s primary concern,” the report concluded.

China’s renewed interest in its southern neighbor is not entirely a quid pro quo. In Kathmandu, mobs of Chinese tour groups visit the tourist enclave of Thamel, where they frequent Chinese-run restaurants, bookstores, and hospitals. Meanwhile, Chinese cultural centers are popping up across the country, notably in the Terai, along Nepal’s southern border with India. According to the Chinese embassy in Nepal, projects such as the Birendra International Convention Center — a gleaming complex near Kathmandu’s international airport — and the capital city’s main highway are evidence that “China treats Nepal as its closest neighbor and best friend.”

Although the above initiatives aim to signify the softer side of Chinese-Nepali ties, China ultimately appears most interested in stifling “anti-Chinese” activities on Nepal’s soil. And given China’s single-minded focus, Communist Party leaders in Beijing seem less concerned with Kathmandu’s political jockeying than with ensuring that the next government is as pliant as the current one. One strategy, analysts suggest, has been to focus fewer resources on national politics and more on localized economic aid, such as building schools in politically sensitive border areas. Although China may consider a return of communist governance ideal, its principal concern is stability. “For China, the ideological difference doesn’t make any difference,” said Dhungel, the presidential adviser. “They had very good relations with the king. They had a very good relationship with the Nepali Congress. And I think they will have relations with whoever emerges as a stable force.”

In the end, although the current political crisis appears destabilizing, it could result in the emergence of a stronger Nepal. Maoist politicians stunned observers in April 2008 by winning a majority of votes in the country’s first post-civil war election. Today, they control roughly 40 percent of the 601-seat parliament and are demanding a hard-earned place in whatever coalition government emerges. The country, Dhungel told me, is primed for a “democratic explosion.” He argues that the economic potential of Nepal — from tourism to the development of resources, including hydropower — remains unrealized.

Other outside forces — including the United States, the European Union, and the United Nations — are all pushing for a peaceful transition to democracy. Washington is calling for the inclusion of the Maoist party (known officially as the Unified Communist Party of Nepal-Maoist) in the political process, despite the group’s continued designation as a terrorist entity by the U.S. State Department. But Western efforts may prove far less influential than those of China and India. In February, Scott DeLisi, who now serves as U.S. ambassador to Nepal, told Congress that the Nepalese often “talk about themselves as a yam between two boulders.” He noted that both India and China have a role to play in Nepal’s economic and political future. “We certainly want to work closely with the government” of Nepal, DeLisi said, “but in doing that I think we have to recognize that we also have to talk to the other regional actors.” Thus, although the United States has its own vision of Nepal as a stable and democratic buffer between competing Asian giants, the road ahead — whether strewn with boulders or cleared of rubble — may be in the hands of Nepal’s neighbors.