Addressing Sino-Bangla trade deficit

Md Shariful Islam
Published :Saturday, 3 October, 2015, Time : 12:00 AM View Count : 3
Prime Minister Sheikh Hasina held a bilateral meeting with Chinese President Xi Jinping at a hotel in New
York on 27 September on the sidelines of UNGA meeting. Among other issues, reducing large trade gap
was the notable one. In such context, it is pertinent to look at the question of 'How can huge trade gap
between Bangladesh and China be bridged?' In fact, 4 October marks the 40th anniversary of Bangladesh-
China diplomatic ties underscore the significance of studying Sino-Bangla ties, especially from trade
perspective.
Sino-Bangla ties dates back to 1975 and over the years, it has been deepened and fostered. Currently,
Bangladesh and China are enjoying a robust and comprehensive partnership. As Chinese ambassador in
Bangladesh, Zhang Xianyi termed China-Bangladesh relations as 'enjoying all-time and all-weather
friendship' (AsiaPulse News, Jun 29, 2009). In addition, the formation of 'Closer Comprehensive
Partnership of Cooperation' in 2010 by the leaders of China and Bangladesh clearly demonstrates the
consolidated level of China-Bangladesh relations. But there are still untapped potentials to move forward
the ties. Thus, the following parts concentrate on how to address trade deficit and increase Chinese
investments in Bangladesh, two major dimensions of the Sino-Bangla ties.
Reducing huge trade deficit: Bangladesh-China trade volume is on the rise and grew roughly six-fold
between 2003 and 2011. Notably, since 1971 till 2004, India was the largest trading partner of Bangladesh
which has been replaced by China from 2004 onward. Pravakar Sahoo notes that 'The share of Chinese
exports in all exports to Bangladesh increased from 13.6 per cent in 2000 to 24.7 per cent in 2007' (Sahoo
2013:125). According to Chinese Embassy in Dhaka, 'the economic and trade cooperation between China
and Bangladesh have maintained good momentum in recent years. Bangladesh now has become China's
third biggest trade partner in South Asia, while China is the largest origin of Bangladesh's imports. The
trade volume reached 8.45 billion USD in 2012, 7 times more than that of 2002'.
It is projected that in the year of 2020, Chinese exports in Bangladesh would be $ 14 billion. But the
problem lies in huge trade imbalance which favours China. For instance, in fiscal year 2012-13,
Bangladeshi imports from China amounted to $ 6324 million while Bangladeshi exports to China
amounted to $ 458.12 million, resulting trade ratio between Dhaka and Beijing in 1:13.8, as noted by
Dhaka Chamber of Commerce and Industry. Notably, this trade ratio was 1: 60.75 in 2000-01. This
demonstrates, to some extent trade imbalance is reducing as China demonstrates keen interests to reduce
the trade imbalance through providing duty-free-access to a list of Bangladeshi products under the
Bangkok Agreement (now called the Asia-Pacific Trade Agreement). According to Chinese Embassy in
Dhaka, since 2010, China has gradually given Bangladesh-made goods duty-free status. Currently, more
than 4,700 items of Bangladesh-made goods enjoy duty-free facility when exported to China. The number
of the items needs to be increased to reduce the trade imbalance. Hence, increasing Bangladeshi exports to
China might be one option to bridge the trade gap.
And to increase Dhaka's export volume to Beijing, readymade garments (RMG) can be a good option. In
fact, given the rise of wages in China from $0.68 in 2003 to $ 3.07 in 2012 as an average hourly labour
costs, it is rapidly progressing toward the high-tech industries rather than basic manufacturing items.
Hence, the level of Bangladeshi RMG export to China can be accelerated which will bring win-win
situation. In this regard, a Chinese delegation comprising 8-members from China National Garment
Association (CNGA), visited 8 apparel factories during its three-day Dhaka visit in September 2012. The
delegation was impressed to see good management, quality products and overall standards of Bangladeshi
factories. According to Feng Dehu, vice president of CNGA, 'We had initial impression. They are
excellent, extraordinary and out of our imagination' (Xinhua News Agency, September 2, 2012).
Consequently, in fiscal year 2013-14, garment exports to China amounted to $ 241.37 million which arose
to $ 304.24 million in 2014-15 fiscal, rose 26 per cent year-on-year. This garment sector has huge
untapped potentials in Chinese markets, particularly among the expanding Chinese middle class. The RMG
potential has been foreseen by Shafiul Islam, president of BGMEA. As he argues, "I believe if we can keep
our momentum and we can make a sincere move and properly use the market access opportunities, then
our RMG export to China will cross a billion US dollars in a few years." ((Xinhua News Agency,
September 2, 2012). So, this opportunity needs to be materialized to reduce huge trade imbalance for
Bangladesh. In fact, this can bring win-win situation for both the parties.
The bottom line is that there are untapped potentials which need to be explored and harnessed to elevate
Sino-Bangla ties. China needs to concentrate on reducing huge trade imbalance. From Bangladesh side,
depending on not so much on any one particular partner whether it is India, China or any other extra-
regional power, Bangladesh needs to maintain a balance and utilize her significant geo-strategic location.
Bangladesh also needs to promote herself as a manufacturing hub, and therefore taking measures to
materialize the investment potentials in the country. Bangladeshi export baskets to China need to be
diversified.
Md Shariful Islam is Lecturer of International Relations, Rajshahi University. E-mail:
shariful_ruir@ru.ac.bd
Published in Daily Observer, October 3, 2015. - See more at:
http://www.observerbd.com/2015/10/03/113327.php#sthash.vbDlqDnf.dpuf