‘A buffer state exists as a buffer state because of the larger powers in the system’ (Partem, 1983:1). This idea of a buffer state presents a subsystem; the larger powers in this system are ‘subsystem dominant’ whereas a buffer state is simply ‘subsystem affecting’ (Keohane, 1969). In this paper, Nepal represents the role of ‘subsystem affecting’ against the ‘subsystem dominant’ of two giant neighbours; China and India. As a small state with limited human resources and economy, the geopolitics of Nepal provides political and economic vulnerability against these ambitious emerging Asian giants. In this respect, two fundamental questions appear; how has Nepal managed to retain independence and neutrality by successfully balanced the dominating influence of both neighbours? Importantly, what future implication in Nepal’s foreign policy is an application as to retain the sovereign political status against the emergent Sino-Indian rivalry in Nepalese soil?