Bangladesh: BRI projects, Chinese investments, Rohingya crisis to dominate talks

January 07, 2025
Bangladesh-China Friendship
  • Foreign Affairs Adviser M Tauhid Hossain to visit Beijing on Jan 20, 2025

Foreign Affairs Adviser M Tauhid Hossain is poised to embark on the maiden bilateral visit to China starting likely January 21, 2025 at the invitation of Chinese Foreign Minister Wang Yi, sources in Dhaka and Beijing said. 

During his visit to Beijing during January 21-24, 2025, Foreign Affairs Adviser M Tauhid Hossain will meet Wang Yi, also a member of the Central Committee of the Chinese Communist Party and a state councilor, and different stakeholders to discuss the political, strategical, economic and cultural issues.

Sources said on January 20, 2025, Foreign Affairs Adviser M Tauhid Hossain will leave Dhaka and is expected to return home January 25, 2025.   

This visit, announced by diplomatic sources in both Dhaka and Beijing, comes at a critical time amid ongoing global tensions such as the Russia-Ukraine conflict and the turmoil in the Middle East, major political change in Bangladesh and tension between Dhaka and New Delhi after the ouster of dictator Prime Minister Sheikh Hasina on August 5, 2024.   

According to a highly-placed Bangladeshi diplomat, this visit aims to deepen Bangladesh's ties with China, the world’s second-largest economy. In the context of these international conflicts, strengthening bilateral relationships becomes all the more crucial for both nations.

A political expert highlighted that political leaders from the USA, India, and EU countries have frequently expressed concerns over Bangladesh's growing dependence on China. Following the World Bank, Asian Development Bank, USA, and Japan, China has become a major source of loans for Bangladesh's development projects. Furthermore, Bangladesh’s defense cooperation with China remains a significant concern for India and Western countries.

Wang Yi is also a member of the Central Committee of the Chinese Communist Party and a state councillor. The Minister is the second-highest ranking diplomat in China after the director of the Office of the Central Foreign Affairs Commission.

 The current minister is Wang Yi, who concurrently serves as the director of the Office of the Central Foreign Affairs Commission.

Foreign Affairs Adviser M Tauhid Hossain will also discuss national and regional issues,  civil war in Myanmar and repatriation of Rohingyas in Myanmar with Wang Yi, also a member of the Central Committee of the Chinese Communist Party and a state councilor.

The Awami League (AL) was highly tilted towards China over the last 15 years (2009-2024) that sometimes caused embarrassment to China and overlooked the interest of Beijing, said a Bangladesh diplomat.

The Teesta bridge project has been a test case to Bangladesh over the years as India has raised objections to the Chinese backed project on security and  strategic points, sources in Dhaka, New Delhi and Beijing said.

The minister of foreign affairs of the People's Republic of China is the head of the Ministry of Foreign Affairs of the People's Republic of China and one of the country's top and most important cabinet posts. Officially, the minister is nominated by the premier of the State Council, who is then approved by the National People's Congress or its Standing Committee and appointed by the president.

During the last 15 years (2009-2024), former Prime Minister Sheikh Hasina served the interest of India, sometimes ignoring the interest of Bangladesh and overlooking China, sources said    

As FDI has dried during the interim government, Bangladesh will invite Chinese investment in the various sectors, sources said.

China has been a major investor in Bangladesh over the years. Chinese entrepreneurs invested 428.09 million US dollars in Bangladesh in 2021-22 fiscal year, 68.15 million US dollars in 2022-23 fiscal year and 283.56 million US dollars in 2023-24 fiscal year.

Hong Kong, also a part of China, invested 121.72 million US dollars in 2021-22 fiscal year,147.55 million dollars in 2022-23 fiscal year and 81.10 million US dollars in 2023-24 fiscal year.

During his visit, Foreign Affairs Adviser M Tauhid Hossain and Chinese leaders are expected to engage in discussions covering a wide range of issues. These will include trade, investment, mid and long-term loans, Belt and Road Initiative (BRI) projects, various Chinese investments, the Rohingya crisis, and the civil war in Myanmar. Such comprehensive dialogue aims to address and bolster the multifaceted relationship between the two countries.

Sources indicate that Bangladesh may seek a special economic package from China to mitigate the macroeconomic pressures facing the country. The civil war in neighboring Myanmar and the influx of 1.1 million Rohingya refugees into Bangladesh have severely impacted the country’s social fabric.

Consequently, Dhaka is expected to request Beijing's active initiatives in resolving this crisis. Additionally, Bangladesh will address the significant trade imbalance with China, urging Chinese entrepreneurs to invest in promising sectors. Currently, China is Bangladesh’s largest trading partner. In the 2022-23 fiscal year, Bangladesh exported goods worth $610.14 million to China, while imports from China totaled $17,826.6 million, resulting in a trade deficit of over $19 billion.

In 2016, during President Xi's visit to Bangladesh, both nations signed a series of Memorandum of Understanding (MoUs) and agreements, promising $26 billion in BRI projects and $14 billion in joint ventures, amounting to a $40 billion package. 

BRI projects in Bangladesh have primarily focused on energy and transportation, with infrastructure investment needs projected to reach 1.5% of GDP by 2040. This substantial investment highlights the strategic importance of Bangladesh in China’s BRI plans and the mutual benefits both countries seek to achieve through these collaborations.

During this visit, Bangladesh is likely to request China to give soft loans to ease the strain on its dollar reserves. These funds could be utilized for importing raw materials and providing budget support. Discussions regarding these loans began following China’s expressed interest. The Economic Relations Division (ERD) recently held an inter-ministerial meeting to evaluate the loans' pros and cons, ensuring that the financial terms align with Bangladesh’s economic needs and repayment capabilities.

China currently ranks fourth among the 32 countries and organizations lending to Bangladesh, with Chinese loans representing nearly 10% of the total loans received annually by Bangladesh. Over the last two years, this amount has exceeded $1 billion annually. Of the total loans provided by China, $3 billion has been granted in the last four years, indicating a growing financial relationship between the two nations.

To alleviate pressure on its depleting reserves, which stood at $19.95 billion as of April 30, Bangladesh Bank allowed the settlement of international trade in Chinese yuan in September 2022. This move aims to reduce reliance on the dollar, thereby diversifying the currency mix and mitigating exchange rate risks. This strategy is part of a broader effort to stabilize Bangladesh's economy amid global financial uncertainties.

Beijing emphasized that the early signing of a China-Bangladesh Free Trade Agreement (FTA) would usher in a new era of economic and trade cooperation, describing it as a transformative step for both countries.

The feasibility study report indicates that the FTA will reduce tariffs on Chinese goods imported into Bangladesh, potentially lowering import prices and alleviating inflation. This reduction in raw material costs could enhance the competitiveness of Bangladeshi products in the international market, supporting an increase in foreign exchange reserves. Furthermore, the FTA is expected to facilitate Chinese investment in Bangladesh, creating employment opportunities, promoting industrial upgrades, and diversifying exports.

The repayment terms of Chinese loans, typically 10-15 years excluding the grace period, pose challenges, with high annual principal payments compared to loans from institutions like the World Bank. Zahid Hussain, former lead economist at the World Bank's Dhaka office, commented on China's efforts to bolster the yuan's reliability in global trade and the potential benefits of such loans, provided the conditions are favorable. 

Meanwhile, China has expressed appreciation for Bangladesh's interest in joining BRICS and assured active support. This commitment was reiterated during the 13th round of bilateral political consultations between Bangladesh and China in Beijing. The consultations focused on enhancing bilateral relations, economic ties, trade, and investment cooperation on multilateral platforms. Both nations emphasized the importance of high-level exchanges and people-to-people connectivity.