i

Table of Contents
Table of Contents .......................................................................................................................................... ii

Abstract ......................................................................................................................................................... 1

1. Introduction .............................................................................................................................................. 2

2. Background of the Study ........................................................................................................................... 3

3. Objective of the Study............................................................................................................................... 3

4. Methodology of the Study ........................................................................................................................ 4

4.1 Source of Data ..................................................................................................................................... 4

4.2 Analytical Techniques ......................................................................................................................... 4

5. Review of Literature .................................................................................................................................. 6

6.1 Trend Structure and Current Picture of Bangladesh-China Trade .......................................................... 8

6.2 Bangladesh-China Trade in South Asia Perspective ............................................................................ 8

6.3 Trade Intensity Indices ...................................................................................................................... 10

6.4 The Importance of China in Bangladesh’s Trade .............................................................................. 12

6.5 The importance of Bangladesh in China’s Trade .............................................................................. 16

6.6 The Balance of Trade of Bangladesh with China............................................................................... 18

6.7 Trade Structure of Bangladesh with China ....................................................................................... 20

7. Measures and Opportunities for Improving Bangladesh-China Bilateral Trade ..................................... 22

7.1 Bilateral Exchange Rate......................................................................................................................... 23

7.2 Reduction in Tariff and Non-Tariff Barriers....................................................................................... 24

7.4 Productive Capacity and Economic Efficiency .................................................................................. 25

8. Conclusions ............................................................................................................................................. 26

References: ................................................................................................................................................. 28

ii
iii
Trade Structure and Measures for Improvement of Bangladesh-China Bilateral Trade: An
Economic Analysis

Abstract
Bangladesh and China relation has started a lot back till it shaped in today’s form which has
created a big trade opportunity for both the country. The present study attempts to estimate the
measures for improvement in Bangladesh-China bilateral trade. Secondary data were used is this
study that collected from World Integrate Trade Solution (WITS), IMF (Various Years),
Direction of Trade Statistic Yearbook, Federal Reserve Economic Data (FRED) and The
Observatory of Economic Complexity (OEC) for the timeline between 1995 & 2015. The
findings of the study consist with trade structure of Bangladesh-China bilateral trade with
relation to both South Asia and Global. There is clear indication that Bangladesh and China trade
relation is improving specifically in 21st century for multiple reasons. However, trade deficit of
Bangladesh is increasing from the beginning (1995-2015) with China. Several infrastructure
projects, increased productivity, economic efficiency and devaluation of Taka in terms to Yuan
would show some improvement in this matter.

Keywords: Trade Structure, Trade Intensity Indices, Revealed Comparative Advantage,

Structure and Direction of Export & Import, One Belt One Road, Bilateral Exchange Rate.

1
1. Introduction
Bangladesh and China have friendly ties with a long history of bilateral trade. This relation goes
beyond the borders of Bangladesh and has good ties with South Asian countries which is making
a China an influential factor in South Asian trade. Bangladesh having bilateral trade with many
countries in the world specially for specializing in RMG sector. However, China is one of the
largest trading partner of Bangladesh as Bangladesh imports the highest from China and growing
export growth with China. Many possible explanations are the govt and non govt firms of China
are looking for more profit seeking behavior (Buckley, 2007). Bilateral trade with China has
always been challenging and fruitful for many countries for which a detailed analysis needed to
cope up with Chinese trade.

Bangladesh has come up with a unique passage for exporting more in China with our own RMG
expansion throughout important economic zones and China is one of them. In addition to
Bangladesh is soon to become a developing nation for which trade ties with countries has to be
stronger than ever to reduce trade deficit and cope up with the growing economic challenges for
Bangladesh. The composition of export from China to Bangladesh has changed significantly for
the past era and reform measures are being taken by China with care (Bakht, 1996).

Bangladesh-China bilateral trade has let our consumer to taste Chinese manufactured products of
different types starting from machineries for production process to daily use belongings. Chinese
products have competitive pricing strategy and they do not feel stiff competition from other
products coming from other countries in Bangladesh (Sahoo,2013).

One Belt One Road (OBOR) which is massive project from Chinese government will build six
corridors to revive the Silk road and make huge landmass with Eurasia to Chinese mainland.
Bangladesh will also be a part of this mega project which will enable developing deep sea-ports
of existing and new one. China has a history of developing other countries sea-ports
(Hambantota deep sea-port) for their trade advancement in India and it has accelerated trade
scenario of both of the countries (Bajaj, 2010).

2
2. Background of the Study
Measuring export and import intensity highly essential for Bangladesh with China to evaluate the
past and present trade scenario which will help to take steps to recover areas which needs to be
recovered. Improvement and opportunity grabbing will make Bangladesh create a better ground
for its’ bilateral trade scenario with China as China is one of the largest trade partner.
Conducting the evidence of past trends will make us understand the depth of our trade structure
which will help us to find ways to reduce the trade deficit with China. This will overall reduce
deficit of Bangladesh’s trade balance. Bangladesh is a vital economic zone in South Asia for
which China consider a key element of trade acceleration in this region if they better trade
scenarios with Bangladesh. If we look upon previous 20 years scenario of Bangladesh-China
bilateral trade scenario then we will come to know that amount of export and import has almost
doubled after 2010 and there are growing demand of Bangladeshi textile products at China. In
addition to, China-India though having a good trade history, they are likely to have some
disagreements in their trade situations of which the recent case was from India not accepting
being a part of China-Pakistan-India corridor as India think it might hinder their sovereignty.
Bangladesh has now great opportunity to rise up from this situation thus flourishing the trade
situation of our country.

3. Objective of the Study

The broad objective is to find measures and opportunities for Bangladesh to improve bilateral
trade situation with China. The specific objectives are:

i. To find out the export and import intensity index of goods traded between Bangladesh
and China.
ii. To evaluate the trend structure between Bangladesh and China with relation to South
Asia.
iii. To analyze the Bangladesh’s and China’s trade share in between them with relation to
their global trade.
iv. To explain the opportunities and measures to be taken by Bangladesh to accelerate the
bilateral trade scenario with China.
v. To conclude based on the findings of the study.

3
4. Methodology of the Study
Analytical technique and source of data both are briefly presented in this section.

4.1 Source of Data

To conduct this research secondary data have been used. Trend structure and current picture of
Bangladesh and China trade has been taken with the timeline between 1995 to 2015 from various
sources such as: - World Integrate Trade Solutions (WITS), IMF (Various Years), Direction of
Trade Statistic Yearbook, The Observatory Economic Complexity (OEC), Federal Reserve
Economic Data with the outlook of South Asian region and global perspective as well.

4.2 Analytical Techniques

Trade intensity index which is used for revealed Comparative advantage. This trade indices
model used by Aho et al. (1980) for a comparison of commonly used measures when applied to
an analysis of U.S. trade performance.

M ij
Mi
mij =
Xj
Xw − Xi

Here,

mij= Import intensity index of trade of country i with country j,

Mij= Imports of a country i from trading partner j

Mi= Total imports of country i

Xj= Total exports of country j

Xw= Total world exports

Xi= Total exports of country i

Export intensity index can also be defined in the same way and that is-

4
 X ij
Xi
xij =
Mj
M w − Mi

Here,

xij= Export intensity index of trade of country i with country j,

Xij= Export of county i to trading partner j

Xi= Total exports of country i

Mj= Total imports of country j

Mw= Total world imports

Mi= Total imports of country i

5
5. Review of Literature
There have been several research papers on China’s bilateral trade papers and also Bangladesh’s
but there are not many papers on Bangladesh-China bilateral trade papers. There is much
analysis on China’s influence on South Asian countries.

Baskaran and Sivakumar (2014) have carried out a research on “China and South Asia: Issues
and Future Trends”. They explained that after 21st century relationship between China and South
Asia has been significantly changed because positive participation in this region. Magnificent
phenomena have enlarged with negative factors emerged as well.

Chaudhary (1995) have conducted a research on “Cross Border Trade between India and
Bangladesh”. He analyzed that China is more interested in natural gas transfer from Bangladesh.
Bangladesh has let China to share Boropukuria’s gas field operation and improve the friendly
ties with China.

Sahoo (2013) have investigated a proilific relation between China and Bangladesh and he
demonstrated that China has captured Bangladesh’s textile, machineries, footwear industries
which has a comparative advantage over other countries products. Hence Bangladesh’s import
structure is mostly based on Chinese influence.

Hossain & Rashid (1999) have carried out a research on “The Political Economy of
Bangladesh’s Large and Growing Trade Deficits with India”. Bangladesh has a huge demand of
cotton and yarn. Cotton textile is one of the most important sector of China to export and they
export five times more than India to Bangladesh and in return Bangladesh’s major textile
(readymade garments) also goes to China.

Rahman (2005) has implemented a research on “China-South Asia Trade: An Investigation into
Trade in Services”. He concluded that Bangladesh’s demand is sourced from China. Implications
of demand is basically filaments, yarn and fabrics of which the main source is China which
implies a significant export led relation between Bangladesh &China.

Xu (2017) has carried out a research on “China and South Asia Trade Competition and
Complementary: Analysis Based on the Background of “One Belt and One Road”. He
exemplified that OBOR (One Belt One Road) has an excellent strategic correlation with South

6
Asian countries because a major portion of oil and natural gas will be carried through Indian
ocean; one of the six corridors of OBOR.

Baichuan & Lizhuo (2015) have conducted a research on “China’s Trading Relations with the
Countries of One Belt and One Road: Based on the Trade Competitiveness and Trade
Complementarities”. They have concluded that trade relation of Bangladesh and China have
been improving and Bangladesh is the third largest trading partner of China in South Asia.

Franklin & Francine (2011) have done an analysis on. “The Breakout of China-India Strategic
Rivalry in Asia and the Indian Ocean.” They have explained that China will carry out some large
investment projects in Bangladesh including multiple sectors. This large-scale investments sea-
port in Chittagong and Sonadia as well. This will enhance the trade ties between Bangladesh and
China.

Genota et al. (2010) have carried out a research on “China Deals”. They have broadened the fact
if China’s investment in agricultural sector of Bangladesh. China has invested a huge amount at
Pagla Water Treatment Plant Project and Shahjalal fertilizer factory. Aiming to create strong
bond with South Asian countries, China’s excellent steps toward Bangladesh has accelerated the
trade relation in 21st century for them.

Ghosh & Partha (2011) have analyzed on their paper “Changing Frontiers: Making Deeper Sense
of China–Bangladesh Relations” that Bangladesh receives handful of tariff concessions from
China under APTA in textile, machinery and mechanical appliances; three major structure of
exports from Bangladesh to China. Under APTA there are also tariff concessions from
Bangladesh as well for China to enlarge sectors for import from China.

7
6. Results and Discussions

6.1 Trend Structure and Current Picture of Bangladesh-China Trade

Trade relation of Bangladesh & China has gotten an immense history and a glazing future ahead.
China’s trade relation with Bangladesh have been going spectacularly in recent years by both
economic factors and proactive foreign policy from both sides (Sahoo,2013). China has been a
great assistance to Bangladesh’s development programs with a visible progress from the past era
to present.

In this section data and trend and current state of Bangladesh-China trade are presented. This
section will overlook into Bangladesh-China trade in context to South Asia as well as individual
country. Bangladesh’s historical trade deficit to growing export picture will also be presented
here.

6.2 Bangladesh-China Trade in South Asia Perspective

Bangladesh and China are two major trading partners at South Asian region. Their combined
share in South Asian trade demonstrates their importance and high influence in the regional
trade. Table 1 shows the trade share of both countries has immense influence from 1995. For
China the total China- South Asia trade in 1995 was 3196.42 thousand US$ which increased over
the timeline and the amount is 111206.94 thousand US$ which is almost 34 times bigger from
1995. Between 2003 and 2012, China more than doubled its exports to Bangladesh, Bhutan,
Maldives, Nepal, and Sri Lanka. Just over a quarter of Bangladesh’s imports now come from
China. Additionally, China has offered hundreds of millions of dollars in investment for large
infrastructure projects, including port facilities in Bangladesh, Burma, Pakistan, and Sri Lanka
(Curtis 2011). However, the amount is not as significant as China for Bangladesh. Though the
influence of Bangladesh’s trade in this region has been a leap for the 20-year period and to be
increased in near future. However, Bangladesh imports a lot more than it exports to South Asia
before 21st century. The balance between export and import is now minimizing slowly. In
addition to Table 2 the export share of Bangladesh and China to South Asia are more or less
same. However, China’s export share is increasing slowly than Bangladesh which remains par
below 3%. Interesting fact is that China’s import share is increasing gradually over the 20-year
period and South Asia has been a major part of China’s total import which is about above 60% in
8
2015. In addition to Bangladesh heavily depends on importing products from South Asian
countries and that is shown in Table 2.

China’s exports to these five countries combined made up 0.45 percent of China’s total exports
in 2003. In short, imports by these five countries are of small importance to China’s overall trade
profile (Brunjes et al., 2013).

Table 1: Bangladesh and China Intra South Asia trade, 1995-2015 (Thousands of US$)

China-
South Asia BD- South
Year Export Import trade Export Import Asia trade

1995 2511.89 684.53 3196.42 81.51 844.77 926.28

2000 3796.35 1889.90 5686.25 83.58 730.97 814.55

2005 15960.89 10724.62 26685.51 274.30 1547.31 1821.61

2010 57607.28 22963.57 80570.85 432.37 4131.65 4564.02

2015 94243.96 16962.98 111206.94 607.54 6812.50 7420.03

Source: World Integrate Trade Solutions (WITS)

9
Table 2 Export and Import Share of Bangladesh and China in Intra-South Asia Trade,
1995-2015(Percent)

Year China’s Export China’s Import Bangladesh’s Bangladesh’s

Share Share Export Share Import Share

1995 1.688 16.68 2.392 45.829

2000 1.523 30.06 1.522 61.056

2005 2.095 48.886 2.939 71.345

2010 3.651 58.931 2.248 74.271

2015 4.145 61.802 1.915 79.824

Source: World Integrate Trade Solutions (WITS)

6.3 Trade Intensity Indices

Trade intensity on both export and import shows the trade orientation and strength between two
countries. This model is essential for finding out the trade chemistry between two countries from
past to present and to evaluate the relation prospective

The value here ranges from 0 to 100. Value defines several explanations between export and
import relationship between two countries. If the value is zero then it implies that there is no
trade relation between the two countries and whatsoever. However, the more the value the more
the intensity implies between two countries. Such as if import intensity is valued 100 or close to
100 then it implies that country i imports from country j at a huge amount that might be expected
from that country’s total share in world trade and it goes for same while it comes to export
intensity.

Export and import intensity have been calculated for Bangladesh and China for selected years in
between twenty years timeline in Table 3.

It is observed that Bangladesh’s export intensity is very low with China. Though having
fluctuations in export intensity, it is improving. The scenario of Bangladesh’s export to China
has been an improvement. The total export to China was $808 million in fiscal 2015-16,
10
Bangladesh's annual exports growth to China has averaged about 30% per annum in the past 5
years (Chowdhury,2017). On the other hand, import intensity is not much of a significantly
different from export intensity. China has reordered their export structure to south Asian
countries and improving the scenario of export volume. Bangladesh is importing a significant
amount in terms to South Asia region. 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 (Ghosh,2011). The highest import
and export intensity are both found in the year 1995 with import intensity 2.72956 and export
intensity having 0.5003. Mutual trade expansion will let increase the index of intensity in both
sector between Bangladesh and China.

Table 3: Bangladesh’s export and import indices with China

Year mij xij

1995 2.72956 0.5003

2000 0.28143 0.0728

2005 2.1104 0.1168

2010 1.6593 0.1456

2015 1.5257 0.2169

Note:

i= Bangladesh, j= China

mij= Bangladesh’s import intensity index with China

xij= Bangladesh’s export intensity index with China

11
6.4 The Importance of China in Bangladesh’s Trade
China is playing an important role in Bangladesh’s trade since the independence and recently
Bangladesh’s trade with China has increased tremendously. The Table 4 compares the growth
rate of Bangladesh’s trade with world, South Asia and China. Trade with China fell very low in
1996 from the previous year with a negative growth of -59.41467%. It made a great leap just
right next year with a hooping growth of 173.38341%. Since then there was not much
fluctuations in growth except in 2011 which incurred a negative growth but then again it spiked
to 73% growth the next year. Interesting fact is trade growth with China is much better than
those growth with South Asia or world for Bangladesh.

Bangladesh’s trade with world is moderately increasing over the period for improved business
situation in Bangladesh. The worst scenario can be seen in 2009 for Bangladesh having negative
growth in World, South Asia and with China.

Here,

BTWW= Bangladesh Trade with World

BTWS= Bangladesh Trade with South Asia

BTWC= Bangladesh trade with China

12
 Year BTWW Growth BTWS Growth BTWC Growth

1995 8845648.896 926276.565 519578.904

1996 9763806.208 10.3797621 1300577.924 40.4092442 210872.812 -59.41467

1997 10801916.93 10.632234 1506501.211 15.8332141 576491.28 173.38341

1998 12074882.56 11.7846271 1197710.431 -20.4972142 776042.924 34.614859

1999 12472238.62 3.29076542 927183.229 -22.587029 802485.726 3.4073891

2000 13104487.98 5.06925325 814550.206 -12.147871 870866.22 8.5210854

2001 13429945.61 2.48355851 1046126.191 28.4299216 904392.28 3.8497371

2002 14632405.11 8.95356937 1432559.571 36.9394614 848854.849 -6.1408564

2003 16549118.37 13.0990993 1883388.658 31.4701808 1139432.86 34.231767

2004 19640226.87 18.6783878 1863074.792 -1.07858067 1637686.803 43.728241

2005 21962109.66 11.8220772 1821607.853 -2.22572594 2067460.927 26.242754

2006 27385245.57 24.6931465 2386327.019 31.0011381 3347372.433 61.90741

2007 30765825.79 12.3445313 3248584.883 36.1332649 2972420.082 -11.201393

2008 39840827.34 29.4970193 4012201.206 23.5061219 4654091.954 56.575848

2009 38803673.19 -2.60324452 3156149.124 -21.3362201 3955481.553 -15.01067

2010 49734818.06 28.1703869 4564023.455 44.6073451 5582499.721 41.133251

2011 65535396.02 31.7696507 6272648.131 37.4368075 3993244.402 -28.468525

2012 60869720.24 -7.11932187 5658531.174 -9.79039385 6909724.132 73.035343

2013 60030689.06 -1.37840485 5119587.146 -9.52445098 7704810.449 11.506774

2014 65791127.2 9.59582211 5186349.218 1.30405187 8671902.305 12.551793

2015 79792872.46 21.2821179 7420032.286 43.0685049 11064546.64 27.590767

Table 4: Growth of Bangladesh’s Trade with China in South Asia and Global Perspective

Source: WITS, Authors Calculation

13
Now in the context of global trade though China’s share in Bangladesh trade is not that much
high but it has been booming. Table 5 will enlarge the view of China’s share in Bangladesh’s
trade for selected years. It is clear that China’s share is increasing over the period. It was
5.87383594% and it increased it to 13.86658519% in 2015. China’s annual ODI flow to
Bangladesh shows an overall upward trend; there the Chinese have been active in mining,
electricity, and chemical industries (Xinhua News 2012). Though having a little growth
implication in Bangladesh’s export to world from China it is evident that it will increase in near
future. However, Bangladesh’s import with world has a significant influence from China and it is
increasing at a steady rate and the growth rate is almost 21% at 2015. Interesting fact is China
implies esteemed percentage while it comes to import. China has exported almost double the
amount from 2010 to 2015 to Bangladesh which made a significant impact on Bangladesh’s total
import share. The amount rose up from 5323341.57 Thousand US$ in 2010 to 10349332.5
Thousand US$ in 2015 which is almost 5 times bigger than in 2000. 21st century trade scenario
of Bangladesh consists of a dramatic influence from China. In the table-

(C/W) T= China’s share in Bangladesh’s global trade

(C/W) X= China’s share in Bangladesh’s global export

(C/W) M= China’s share in Bangladesh’s global import

14
 Table 5: China’s share in Bangladesh’s global trade for selected years

Item 1995 2000 2005 2010 2015

Global Exports of Bangladesh 3407241.216 5493226.431 9331583.363 19230982.56 31734162.42

Global Imports of Bangladesh 5438407.68 7611261.55 12630526.3 30503835.5 48058710.04

Exports to South Asia 81510.758 83577.398 274295.984 432373.903 607536.987

Imports from South Asia 844765.807 730972.808 1547311.869 4131649.552 6812495.299

Exports to China 47554.008 13901.207 65197.861 259158.148 715214.1

Imports from China 472024.896 856965.013 2002263.07 5323341.57 10349332.5

(C/W) T 5.87383594 6.645557013 9.413762881 11.2245303 13.86658519

(C/W) X 1.395674829 0.253060877 0.698679511 1.34760742 2.253767062

(C/W) M 8.679468767 11.25917179 15.85257034 17.45138435 21.53476972

Source: WITS, Authors Calculation

15
We can also evaluate China’s growing import by overlooking its’ top 5 import partners.

Table 6: China’s position among top 5 import partners for Bangladesh at Selected Years
(Thousands of US$)

Country Import Country Import Country Import Country Import

2000 2005 2010 2015

China 856.965 China 2002.263 China 5323.341 China 10349.33

Singapore 672.165 India 1372.038 India 3521.324 India 5882.08

India 614.541 Kuwait 856.938 Thailand 1727.596 Singapore 4417.926

Japan 561.601 Japan 746.787 Singapore 1654.078 Hong Kong, 2624.045

China

Korea, Rep. 481.245 Korea, 583.154 Hong Kong, 1551.565 Indonesia 2203.619
Rep. China

Source: IMF (Various Years), Direction of Trade Statistic Yearbook.

From the above table we can demonstrate that China has been the top 5 importers in those
selected years the difference between them and 2nd positioned country is increasing by time.

6.5 The importance of Bangladesh in China’s Trade

The importance of Bangladesh in China’s trade can also be examined. Bangladesh’s influence of
China’s global trade has been almost the same from 1995 to 2010 and that is 0.18% with a little
low in the year 2000 that is 0.14%. It has increased in 2015 by 0.279900216 %. As we already
know import from China has almost doubled in 2015 from 2010 to Bangladesh so it has
influenced the growth in total export from China. Bangladesh’s share in China’s total export is
also increasing as it was 0.317264742% growth in 1995 and 0.455222221% growth in 2015.
China’s trade volume with our South Asian focus countries (Bangladesh, Bhutan, Maldives,
Nepal, and Sri Lanka) grew roughly six-fold between 2003 and 2011 (Frankel,2011).
Bangladesh’s share in China’s total export is also showing a light for Bangladesh’ trade as
16
 Bangladesh’s export to China has put a good implication in China’s total import which was
0.018564316% growth in 2010 and 0.042583311% growth in 2015. With having a

Table 7: Bangladesh’s share in China’s global trade for selected years (Thousands of US$)

Item 1995 2000 2005 2010 2015

Global Exports of China 148779499.5 249202551 761953409.5 1577763751 2273468224

Global Imports of China 132083499 225093731 659952762.1 1396001565 1679564325

Export to South Asia 2511889.347 3796352.061 15960891.6 57607277.91 94243957.46

Imports from South Asia 684529.62 1889902.566 10724618.73 22963571.1 16962978.78

Export to Bangladesh 472024.896 856965.013 2002263.066 5323341.573 10349332.54

Imports from Bangladesh 47554.008 13901.207 65197.861 259158.148 715214.1

(B/W) T 0.184993718 0.183612281 0.145400658 0.187724959 0.279900216

(B/W) X 0.317264742 0.343882922 0.262780249 0.337397888 0.455222221

(B/W)/M 0.036002989 0.006175742 0.009879171 0.018564316 0.042583311

Sources: WITS, Authors Calculation

0.036002989% growth in 1995 China’s import from Bangladesh with perspective to their total
import. In the table

(B/W) T= Bangladesh’ share in China’s global trade

(B/W) X= Bangladesh’s share in China’s total export

(B/W) M= Bangladesh’s share in China’s total import

17
The direction of Bangladesh for China’s export market can further be realized from Table 8. It
can be seen that Bangladesh is the 2nd highest importer from China.

Table 8: Direction of China’s top 4 export to South Asian Countries for Selected Years
(Percent of Total Share)

Country 2000 2005 2010 2015

India 0.44 1.1 2.1 2.7

Bangladesh 0.24 0.29 0.39 0.45

Pakistan 0.17 0.22 0.32 0.28

Sri Lanka 0.08 0.07 0.07 0.07

Source: The Observatory of Economic Complexity (OEC)

6.6 The Balance of Trade of Bangladesh with China

Bangladesh has always a trade deficit with China since the independence of Bangladesh and
recently it has been increasing since then. Bilateral trade deficit impairs cordial co-operation
between the two countries (Rahman,2000). Table 9 will provide trade situation with Bangladesh
and Chia for 20 years. These figures clearly demonstrate that there is a unfavorable trade balance
with China. Trade deficit has been growing with the amount of both export and import grow.
Inspite of having growth in export to China from Bangladesh, there are more import every year
for Bangladesh from China. While the amount of import was 632.94 Thousand US$ in 1995,
import amount is 13894.71 Thousand US$. On the other hand, export to China was 45.07
Thousand US$ in 1995 which increased into 816.85Thousand US$ in 2015. So, there will be
trade deficit despite of having increased export to China from Bangladesh.

18
Table 9: Bangladesh’s Trade Balance with China, 1995-2015 (Thousands of US$)

Year Export to Import to Deficits Export as percentage

China China of Import
1995 45.07 632.94 587.87 7.12
1996 34.22 653.04 618.82 5.24
1997 54.34 696.11 641.77 7.81
1998 26.47 660.48 634.01 4.01
1999 14.25 700.87 686.62 2.03
2000 18.84 899.59 880.75 2.09
2001 16.70 955.15 938.46 1.75
2002 32.36 1066.27 1033.91 3.03
2003 33.39 1334.67 1301.28 2.50
2004 57.01 1906.27 1849.26 2.99
2005 78.60 2402.74 2324.14 3.27
2006 98.84 3090.40 2991.57 3.20
2007 114.17 3349.76 3235.59 3.41
2008 131.91 4556.07 4424.16 2.90
2009 140.72 4441.07 4300.35 3.17
2010 268.88 6789.10 6520.22 3.96
2011 449.04 7810.66 7361.62 5.75
2012 479.73 7970.09 7490.37 6.02
2013 602.37 9705.09 9102.72 6.21
2014 761.11 11782.27 11021.16 6.46
2015 816.85 13894.71 13077.86 5.88
Sources: WITS

19
6.7 Trade Structure of Bangladesh with China
Here we will see the structure of Bangladesh’s export to China. From Table 10 we can see that
Animal Hides were the most prominent product for exporting to China from Bangladesh until it
is getting reduced from FY 2010 (12%, which was 31% in 2005). Textile products got a
whooping export from Bangladesh to China and it is the major component of Bangladesh’s
export in 2015 that is 72%. Chemical products were also a major pat of export (32% in 1995) but
lost the appeal after that. Animal products, textile are the main component in recent times that
China import from Bangladesh.

Table 10: Bangladesh’s Export Structure to China (in Percent)

Commodities FY 1995 FY 2000 FY 2005 FY 2010 FY 2015

Animal Hides 37 40 31 12 6.5

Chemical Products 33 0.83 0.10 0.15

Textiles 22 27 36 57 72

Animal Products 5.1 17 6.4 8.5 8.7

Transportation 2.1 4.8

Machines 2.1 3.6

Plastic & Rubbers 9.6 7.5 3.1

Others 0.8 13.07 8.5 15 9.55

Total 100 100 100 100 100

Sources: The Observatory of Economic Complexity (OEC)

20
 Table 11: Number of Commodities Imported by Bangladesh at 6 Digit H.S Code Level

Commodities FY 2010 FY 2011 FY FY 2013 FY 2014 FY 2015

2012

From world 4116 4148 4115 4102 4156 4208

From China 3184 2933 3295 3286 3408 3530

Commodities Imported from China % 77.35666 70.70878 80.0729 80.10726 82.00192 83.88783
of Global Imports

Sources: The Observatory of Economic Complexity (OEC)

Table 12 provides number of commodities imported from China for selected years. It is evident
that Bangladesh imports mainly textile products (knit, cotton, yarn), machines, chemical
products and metal. China holds an import location for Bangladesh for import as 83.88783% of
total import if Bangladesh came from China. From Table 13 we can also look upon the
commodities percentage which Bangladesh import from China.

21
Table 12: Structure of Bangladesh’s Import from China

Commodities FY 1995 FY 2000 FY FY FY

2005 2010 2015

Textile 37 42 34 41 37

Mineral Products 28 1.4 2.8 2.0 3.1

Machines 8.5 24 32 26 22

Chemical Products 8.3 8.4 13 11 6.5

Metals 2.7 12 4.9 4.9 9.3

Transportation 2.6 3.3 3.9 4.1 3.2

Others 12.7 8.9 9.4 11 18.9

Total 100 100 100 100 100

Source: The Observatory of Economic Complexity (OEC)

7. Measures and Opportunities for Improving Bangladesh-China Bilateral Trade

China is not just improving trade ties but also increasing its investment in Bangladesh. Since
trade and investment go hand in hand, increase in investment facilitates more trade and vice
versa (Hossain,1999). Bangladesh exported garment items to China worth $341 million,
registering 12% growth in fiscal 2015-16. China, which has over $200-billion domestic garment
market, is becoming a major export destination for Bangladesh owing to its fast-increasing
middle-class population. There are several sectors and opportunities by which Bangladesh and
China relation can be improved more to reduce the growing trade deficit. China has little
investment in Bangladesh but recently there have been some openings and trade deals made with
China which will enrich Bangladesh-China bilateral trade scenario.

22
7.1 Bilateral Exchange Rate
China use Yuan(RMB) as their currency the nominal exchange rate of Taka/Yuan is showing a
great significance which will increase export of Bangladesh. From Table 13 we can see the
changes of nominal exchange rate for selected years between 2000 and 2015.

Table 13: Trend of Exchange Rate between the Currencies of Bangladesh and China

Year Nominal Exchange

Rate (Taka/Yuan)

2000 6.305

2005 7.277

2008 9.350

2010 10.089

2013 12.788

2014 12.805

2015 12.541

Sources: Federal Reserve Economic Data (FRED)

From the above table it can be seen that Taka has been depreciating in terms to Yuan over the
years till 2014 because in 2015 there was a little value appreciation of Taka in terms to Yuan.
The magnitude of this table is more the value depreciation of Taka more the export to China
from Bangladesh. As we already know from our previous analysis that Bangladesh’s export is
rising to China and this nominal exchange rate is one of the key role behind it. The uprising trend
shows that Taka has been depreciated much in this 15 years. In 2000 the exchange rate was
6.305 and it doubled in 2013 and became 12.788. Hence, Bangladesh’s currency is appropriate
for exporting more in China until it starts to depreciate following by a declining trend.

23
7.2 Reduction in Tariff and Non-Tariff Barriers
Bangladesh started move towards liberal trade policies and so as China as both of them plan to
develop and continue their running economy. Bangladesh has initiated the program of tariff
liberalization earlier than India- in the mid-1980s, and the speed of liberalization in Bangladesh
is faster than that in India. Bangladesh has continued this higher speed of liberalization till recent
years (Dasgupta,2000). From Table 14 we will come to know that Bangladesh has been reducing
tariff values to attract more foreign investments as foreign investment brings many benefits to
host country. On the other hand, China has been reducing it too because of their planned
development of their economy and be a superpower soon over USA.

Table 15: Tariff rate, most favored nation, weighted mean, all products (%)

Year Value (Bangladesh) Value (China)

2000 18.11 14.67

2003 19.06 6.48

2005 22.07 4.9

2010 10.16 4.08

2015 12.41 4

2016 10.86 4.29

Source: Federal Reserve Economic Data (FRED)

We can see from the table that is tariff rate for all products for weighted mean is going down
after 2005 and it 10.16% in 2010. Though there is an increase in 2015 but it again got reduced
and became 10.86% for Bangladesh. On the other hand, China devalued their weighted average
tariff rate significantly which was 14.67% in 2000 and that is 4.29% which encompasses a huge
opportunity for foreign investment in China. China has become an elite exporter in world trade
because they let foreign investment in their country which boosted their export led economic
growth.

24
One Belt One Road is the most ambitious step by Chinese government till date which will cover
65% of total world’s population, one third of total worlds’ GDP and about a quarter of all the
goods and services that move. OBOR was proposed in 2013 by Chinese government with an aim
to connect Eurasian landmass to Chinese mainland. China plans to invest $4tn in OBOR related
projects where Bangladesh has an opportunity to capture a chunk of this huge investment. OBOR
is mainly an initiative of several mega infrastructure projects to revive the ancient Silk road.
Here comes Bangladesh’s opportunity when China’s President Xi Jinping signed several deals
with Bangladesh government worth about $21.6 bn. Bangladesh part of the Bangladesh-China-
India-Myanmar corridor which is one of the six corridors of OBOR. Regarding this initiative
China has decided to develop a deep sea- ort and also conducted a deal with Pyra deep sea-port
to develop several components of this sea-port and make it eligible for more shipments to collect.

China is interested in developing Bangladesh’s deep sea-infrastructure because geographically

Bangladesh will play a vital role in correlating the BCIM corridor. In addition to for this mega
project China will be looking for cheap and efficient labor and Bangladesh is surely an
appropriate candidate for this which will ensure more remittance in future.

7.4 Productive Capacity and Economic Efficiency

The internal dimension of trade deficit has a reason of which is Bangladesh’s poor economic
growth strength though it is progressing fast enough. In order to meet the trade balance
efficiency Bangladesh has to accelerate and develop its economic strength and developing the
production efficiency which Bangladesh mainly exports to China. It is foreseen that
Bangladesh’s textile products are much valuable for China and they import it from Bangladesh in
a huge amount which consists up to major portion of total exports to China. Animal hides and
chemical products which were one of the most exported products to China has to be relived again
which will ensure export boost to our economy. We have that advantage over exporting animal
hides as we have big Muslim festival every year which consists of nearly millions of cows,

25
goats’ hides. Bangladesh will also have to look upon import substituting alternatives to reduce
import from China like machines and textile raw materials to reduce the trade deficit. Several
Bangladeshi owned electronics company are starting to rise in market which shows promising
alternatives for Chinese machines and electronic equipment.

To gain advantage in bilateral trade there is no alternative to improve the productive and
economic efficiency. Technological base and technological efficiency will also have to be
ensured in our production areas for ensuring growth of domestic economic efficiency. Creative
intervention of government, huge investment and skilled labor will be ha help for this
technological knowledge sharing capacity building and expanding.

8. Conclusions
The present study has showed the overall bilateral trade scenario of Bangladesh and China. The
findings of the study also include China and Bangladesh’s trade share in South Asia and world
both in Thousands of US$ and growth of export and import.

Trade share of China and Bangladesh grows exponentially over the period between 1995 and
2015. China’s export share and import share in South Asia has increased over the period and
Bangladesh’s as well. The export and import intensity index of Bangladesh with China is
comparatively low in terms of both export and import. However, China is Bangladesh’s largest
trading partner though having low trade intensity because of huge imports from China. The
finding also showed that China’s position is on top in terms of Bangladesh’s import partner.

China’s share in Bangladesh’s trade is also significant in several fields with growing chunk in
Bangladesh’s total import whereas Bangladesh’s share in China’s trade is low but is growing as
Bangladesh is progressing as soon to be developing nation.

Bangladesh’s balance of trade with China has growing deficit with higher rate of increasing rate
though having much larger export growth from Bangladesh as import rate is much higher than
export for Bangladesh.

Bangladesh can improve their trade scenario in order to reduce trade deficit with China and that
is to continuation of devaluation of bilateral exchange rate between Bangladesh and China.
26
Grabbing the esteemed opportunity to be part of One Belt One Road initiative and last but not
the least to try increasing the efficiency of economy structure and improved productivity of
production process of export goods which are being exported to China.

27
References:
Aho, C.M., Harry P.B., and Joseph, P., (1980),” Assessing the Changing Structure of U.S.
Trade”, U.S. Department of Labor, Economic Discussion Paper, 2:12-67.
Bajaj, Vikas., 2010., “India Worries as China Builds Ports in South Asia.” New York Times,
February 15.
Bakht, Zaid., (1996), “BIDS Study on Illegal International Trade in Bangladesh, 1990: An
Update [Mimeo.]”, Dhaka: Bangladesh Institute of Development Studies, 23(9):120-154.
Brunjes, E., Levine, N., Palmer, M and Smith, A., (2013),” China’s Increased Trade and
Investment in South Asia”, U.S. Government Office of South Asia Policy, 44(5):25-95.
Baskaran, S. and Sivakumar, N.,(2014),”China and South Asia: Issues and Future Trends”,
International Journal of Liberal Arts and Social Science, 2(6).
Buckley, Peter J., L. Jeremy Clegg, Adam R. Cross, Xin Liu, Hinrich Voss, and Ping Zheng.
2007, “The Determinants of Chinese Outward Foreign Direct Investment”, Journal of
International Business Studies, 38 (4): 499-518.
Chaudhary, S.K. (1995) ‘Cross Border Trade Between India and Bangladesh’, New Delhi:
National Council for Applied Economic Research, 45(12):95-127.
Chowdhury, R., (2017),” China Bangladesh's largest trade partner”, The News Today, May 19.
Curtis, Lisa. 2011. “The China Challenge: A Strategic Vision for U.S.-India Relations.” Reuters,
July 19. http://blogs.reuters.com/indiaexpertzone/2011/07/19/the-china-challenge-a-
strategic-vision-for-u-sindia-relations/.
Dasgupta, B., (2000), “International Institutions for Global Trade: The Case for South Asian
Free Trade association”, Atlantic Publishers and Distributors, 9(5):15-47.
Frankel, Francine R. 2011. “The Breakout of China-India Strategic Rivalry in Asia and the
Indian Ocean.” Journal of International Affairs, 64 (2): 1-12.
Genota, C., Jeffrey,A and Joseph, L., 2010. “China Deals”, The China Business Review, 37 (6):
52-54.
Ghosh, Partha S. (2011) ‘Changing Frontiers: Making Deeper Sense of India–Bangladesh
Relations’, South Asia Research, 31(3): 195–211.
Hossain, A. & Rashid, S. (1999) ‘The Political Economy of Bangladesh’s Large and Growing
Trade Deficits with India’, Pakistan Development Review, 38(1): 25–68.
Kojima, K. 1964. ‘The Pattern of International Trade Among Advanced Countries’, Hitosubashi
Journal of Economics, 5(2): 18-38.

28
Rahman, M., (2005),” China-South Asia Trade: An Investigation into Trade in Services”, South
Asia Network of Economic Research Institutes (SANEI) Study Programme. Dhaka: Centre
for Policy Dialogue, 22(4), 23-57.
Rahman, M., (2000) ‘Bangladesh–India Bilateral Trade: An Investigation into Trade in
Services’. South Asia Network of Economic Research Institutes (SANEI) Study
Programme. Dhaka: Centre for Policy Dialogue, 34(9):225-321
Sahoo, P., (2013), “Economic Relations with Bangladesh: China’s Ascent and India’s Decline”,
South Asia Research, 33(2):123-139.
Sang Baichuan, & Yang Lizhuo., (2015),” China’s Trading Relations with the Countries of One
Belt and One Road: Based on the Trade Competitiveness and Trade Complementarities”,
Economic Problems, 8: 1-5.
Venkatasubbulu, T.1996. India’s Trade with SAARC Countries, Discovery Publishing House,
New Delhi 110 002
Xinhua News., 2012. “China/Sri Lanka: China’s Top Legislator Proposes Stronger Partnership
with Sri Lanka.” September 18. http://news.xinhuanet.com/english/china/2012-
09/18/c_131856174.htm
Xu, S., (2017),” China and South Asia Trade Competition and Complementary: Analysis
Based on the Background of “One Belt and One Road”, Chinese Studies, 6:108-122.

29
30
31
32
33