Nepal lawmakers Sunday adopted a $500 million US grant, following street clashes between police and protesters who are against the funds, which have become a bone of contention between China and the United States.

Nepal signed the US government's Millennium Challenge Corporation (MCC) pact in 2017 to fund infrastructure projects but its ratification had been in limbo because of divisions within political parties, including the ruling coalition.

Major opposition came from Prime Minister Sher Bahadur Deuba's coalition partners including Maoist politicians -- seen as traditionally close to China -- who said it undermined Nepal's sovereignty.

Compared to previous days, a smaller group of opponents of the pact clashed outside parliament on Sunday afternoon as police used tear gas and water cannons to disperse the crowd, which was cleared from the streets before the vote.

As part of a compromise, Sunday's vote came with an "interpretive declaration" stipulating that Nepal will not become part of any strategic, military or security alliance "including the Indo-Pacific Strategy" of the United States.

Finance Minister Janardan Sharma, also a Maoist politician, said that the declaration adequately addressed concerns regarding the pact.

"The government has now declared that the MCC Compact is purely an economic project. Now, there should be no suspicion on this programme," Sharma said.

Indian daily the Hindustan Times reported last week that Washington believes China is behind a disinformation campaign against the pact.

According to Nepali media, US Assistant Secretary of State for South and Central Asian Affairs Donald Lu recently held separate telephone conversations with Nepali politicians, urging them to endorse the MCC pact by February 28 or Washington would "review its ties with Nepal".

The Chinese Foreign Ministry meanwhile indicated that it believes such development cooperation should come with no strings attached.

On Wednesday Chinese Foreign Ministry spokeswoman Hua Chunying questioned why a grant came with an ultimatum.

"How can anyone accept such a 'gift'? Is it a 'gift' or Pandora's box?" she said at a regular briefing in Beijing.

The MCC, created by the US Congress in 2004, offers large grants to support economic growth and reduce poverty, according to Washington.

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