Bangladesh's trade deficit with China rises by over 1.0pc

Bangladesh's trade deficit with China increased marginally by over 1.0 per cent to US$16.45 billion in the last fiscal year ending on June 30, compared to the same period a year earlier, according to the recently-released data from Bangladesh Bank.

During this period, Bangladesh imported goods worth $17.80 billion while exporting only $1.35 billion, resulting in a significant trade imbalance. Excluding services, the trade deficit stood at $16.28 billion in 2022-23 fiscal year.

China remains Bangladesh's largest trade partner, primarily supplying raw materials and semi-finished goods that are vital for Bangladesh's manufacturing industries. Among these goods ready-made garment (RMG) sector is key, which depends heavily on these imports to produce goods for both domestic consumption and export.

Economists argue that the trade deficit with China is not a cause for concern. They highlight that imports from China significantly contribute to Bangladesh's export-oriented industries, enhancing the country's export capabilities.

Dr. M. Masrur Reaz, chairman of Policy Exchange Bangladesh, a privately-owned think tank, noted that the trade deficit is a byproduct of China's cost-competitive goods dominating the Bangladeshi market. These include machinery essential for the RMG sector. "If imports from China grow, they positively impact Bangladesh's exports," Dr. Masrur said.

The rapid growth of Bangladesh's garment industry-employing around 5.0 million workers most of whom are women-has deepened trade relations with China.

As the world's second-largest apparel exporter after China, Bangladesh relies heavily on Chinese machinery and raw materials. Since 2018, China has been Bangladesh's largest trading partner, overtaking neighbouring India, now ranked second.

Chinese President Xi Jinping's Belt and Road Initiative (BRI) introduced in 2013 brought Bangladesh into the fold in 2016. During a state visit that year, President Xi pledged $40 billion for infrastructure projects under the BRI framework, cementing economic ties.

Dr. Zahid Hussain, another leading economist, emphasised the critical role of Chinese imports in supporting Bangladesh's growth, particularly in machinery and raw materials essential for export-driven and domestic industries.

"Most of our machinery and raw materials come from China," Dr. Hussain noted, adding that Chinese funding for BRI projects is more accessible than financing from multilateral organisations.

Industry insiders confirm the indispensability of Chinese raw materials for Bangladesh's competitive edge in international markets.

Syed Nazrul Islam, managing director of Well Dress, a subsidiary of Well Food Group, highlighted this dependency, saying "We can't afford not to buy from China; our entire supply chain would collapse."

He noted that that Chinese-made automatic sewing machines, widely used in factories, exemplify how imported technology drives Bangladesh's economic resilience.

President of Bangladesh Chamber of Industries (BCI) Anwar Ul Alam Chowdhury underscored the significance of Chinese imports in reducing production costs in the RMG sector. "We have no alternative to China," Mr. Chowdhury said, adding that Bangladesh also imports pharmaceuticals, cement, and chemicals from China at competitive prices.

Despite its trade imbalance with China, Bangladesh maintains trade surpluses with key Western markets, including the United Kingdom, the United States of America, and the European Union.

In fiscal year 2023-24, Bangladesh recorded a $3.76 billion trade surplus with the United Kingdom, $4.57 billion with the United States, and $18.57 billion with the EU's 27-member bloc.

Bangladesh's trade strategy effectively leverages Chinese raw materials to produce goods for export to these markets, contributing to its economic resilience and growth.

jasimharoon@yahoo.com