The correct answer is option 2: China is the only country with an Observer status in SAARC. This statement is not correct. SAARC, the South Asian Association for Regional Cooperation, is an organization comprising eight member countries in South Asia - Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. SAARC was established in 1985, and its headquarters is located in Kathmandu, Nepal.

Option 1 is correct - the headquarters of SAARC is indeed located in Kathmandu.

Option 3 is correct as well - the first SAARC Summit was held in Dhaka, Bangladesh.

Option 4 is also correct - the eighteenth SAARC Summit was held in Nepal.

However, option 2 is incorrect. China is not the only country with an Observer status in SAARC. In fact, SAARC has several Observer countries and organizations, including Australia, China, Iran, Japan, South Korea, the United States, the European Union, and the United Nations. These Observer countries and organizations participate in SAARC meetings and activities as observers, but they are not full members of the organization.