Evolving partnership between Bangladesh and China

Bangladesh's Chief Adviser, Professor Muhammad Yunus during his recent state visit to China, met Chinese President Xi Jinping and both sides appear to have used this opportunity to reaffirm old diplomatic and economic ties between the two countries.

During the meeting, Xi Jinping recalled China-Bangladesh long-standing history of friendly exchanges, saying the ancient Silk Road closely linked the two countries. Terming Bangladesh a good neighbour, good friend and good partner of mutual trust, he said China maintains a high degree of stability and continuity in its good-neighbourly and friendly policy toward Bangladesh, as this year marks the 50th anniversary of the establishment of China-Bangladesh diplomatic relations.

"China is ready to work with Bangladesh to bring China-Bangladesh cooperation to new heights and deliver greater benefits to the two peoples, Xi said, stressing that China and Bangladesh should continue to deepen mutual political trust and firmly support each other on issues related to bilateral interests.

Analysts, in the context of the visit has pointed out some interesting areas of future engagements between the two countries.

Foreign direct investment (FDI) from China in Bangladesh has risen to $2.67 billion as of September 2024, according to official data, cementing China's position as the country's second-largest investor. This FDI stock includes US Dollar 1.41 billion from mainland China and $1.26 billion from Hong Kong, according to the Bangladesh Bank (BB), reflecting a broader effort by Chinese firms to diversify amid the US-China trade war.

Bangladesh, with its low-cost labour and expanding industrial base, has emerged as an attractive destination for Chinese companies seeking alternatives to traditional manufacturing hubs.

The textile sector, a pillar of Bangladesh's export economy, has received the largest share of Chinese FDI, totalling $760.14 million. The telecommunications sector has also drawn substantial Chinese investment, with $322.45 million funneled into expanding 4G and 5G networks.

Beyond these core industries, Chinese capital is flowing into agriculture, energy and pharmaceuticals, strengthening Bangladesh's infrastructure and supply chains.

The trading sector alone has attracted $203.78 million, according to BB data, modernising logistics and enhancing the country's global competitiveness.

Experts say these investments could increase further if Bangladesh creates a more business-friendly environment, making it a prime beneficiary of shifting global trade dynamics.

Political analysts assert that Yunus's visit to China has catapulted Bangladesh-China relations to unprecedented heights, with Bangladesh securing a commitment of USD 2.1 billion in Chinese investments, loans, and grants during his historic China tour.

Chinese Ambassador in Dhaka Yao Wen said nearly 30 Chinese companies have pledged to invest $ 1 billion in Bangladesh.

China has also planned to lend some $ 400 million in the Mongla port modernisation project, $350 million in the development of the China Industrial Economic Zone and another $ 150 million as technical assistance. The rest of the amount would come as grants and other forms of lending.

On March 27, Yunus addressed the Boao Forum for Asia (BFA) Annual Conference in Hainan, asking the Asian nations to chart a clear roadmap for a shared future and shared prosperity.

The Chief Adviser also focused on creating a sustainable financing mechanism for Asian countries. "We need reliable funds that address our challenges and meet our growing demands."

About trade cooperation, he said, Asia remains one of the least integrated regions and this weak integration stifles investment and trade. "We must work to boost trade cooperation immediately," he said.

Referring to food and agriculture cooperation, Yunus said the Asian countries should promote resource-efficient farming and domestic production must be enhanced for food security. "We need to reduce import reliance and achieve self-sufficiency. Expanding tech-based sustainable agricultural solutions and innovation in regenerative and climate-smart farming is key," he said.

It was also stressed by Bangladesh that building a strong tech ecosystem, sharing knowledge and data and investing in technology incubation and innovation in Asia.

During meetings in China Professor Yunus also focused on the long-pending Rohingya crisis, calling upon the Asian leaders to come forward towards ensuring safe and dignified repatriation of displaced Rohingyas to Myanmar. It was pointed out that "Bangladesh has been hosting over 1.2 million Rohingyas, who are Myanmar nationals, for over seven years. We continue to bear significant social, economic, and environmental costs," he said.

Analysts have also observed that there has been careful scrutiny pertaining to existing trade benefits offered by China to Bangladesh. It has been noted that Bangladesh has hardly been able to utilise the generous zero-duty trade benefits offered by China due to a lack of product diversity, whereas Chinese imports have steadily risen, given the country's increasing reliance on a single sourcing destination.

China has been the single largest trading partner for Bangladesh for many years, but imports from the country have far outweighed exports, with shipments from Bangladesh failing to cross even the one-billion-dollar mark. Economists have indicated that in the July-December period of the current fiscal year, Bangladesh imported goods worth $8.89 billion and exported goods worth $461.05 million, according to data from the Bangladesh Bank (BB) and Export Promotion Bureau (EPB). In the previous fiscal, the total import value from China was $16.63 billion whereas exports amounted to just $715.37 million.

Such a scenario, has for some time led business leaders, economists and geo-strategic experts to suggest that Bangladesh should hold negotiations to attract more Chinese investment in Bangladesh and minimise the trade gap.

Apparently, a major factor behind the rise in imports is the fact that Bangladesh relies heavily on China for textile articles such as yarn and fabrics, especially man-made fibers and fabrics, which account for over 40 per cent of total Chinese imports by Bangladesh. Capital machinery also makes up nearly a quarter of imports, accounting for 24 per cent. Other imports include cotton, food items and other materials.

On the other hand, Bangladesh's main export items to China are garments although China itself is the largest apparel exporter in the world, boasting a global market share of over 31 per cent.

Efforts should also be made to try and allure Chinese entrepreneurs to relocate their factories to Bangladesh as there are ample opportunities for investment, not only in man-made fibers but also in sectors such as leather and leather goods, solar panels, semiconductors and microchips, Razzaque added.

Currently, Chinese investment in Bangladesh is mainly confined to infrastructure projects It has also consequently been suggested that there should be a regular joint trade and investment fair to promote business between the two countries. Such a move would also assist ongoing negotiations to sign a free trade agreement (FTA) between Bangladesh and China and reframe it as a free trade and investment agreement (FTIA).

A lot of Chinese entrepreneurs have been inquiring about investing in Bangladesh after Donald Trump came to power in the US and hiked duties on Chinese shipments to 35 per cent. Moreover, Chinese importers are apparently also showing a lot of interest in importing more jackfruits, mangoes, guavas and hilsa fish from Bangladesh, which would help diversification.

The media has reported that the Chief Adviser's visit has also led an official of the Chinese Entrepreneurs Association in Bangladesh (CEAB) to point out that this platform has more than 1,000 registered members, with most companies investing in garments and textiles enterprises in export processing zones.

In any case, we have had an important bilateral exchange of views. One can only hope that we can find the right denominators and move forward together. The socio-economic dimensions have to be carefully taken forward.

Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.  muhammadzamir0@gmail.com