China-Bangla economic cooperation: Current trends and future prospects


Borhan Uddin Khan | Published: October 11, 2016 19:18:51 | Updated: October 18, 2017 10:56:21


China-Bangla economic cooperation: Current trends and future prospects

In the course of decolonisation that started at the end of the Second World War, the struggle for independence and liberation in Asia, Africa, and Latin America surged. The newly-independent countries longed for equality in international relations. Echoing this historical trend, China, India and Myanmar jointly initiated the Five Principles of Peaceful Coexistence. This was a major initiative in the history of international relations and a historic contribution to the building of a new type of just and equitable international relations.
After the People's Republic of China had its seat restored in the United Nations in 1971, it was able to take part in the major international conferences and meetings; for instance, the 1972 Stockholm Conference on Human Environment and the third UN Conference on the Law of the Sea. In the first few years, however, China's contribution was mostly felt only in the political arena. This situation had changed in the late 1970s when China adopted a new policy to start economic reforms and opened its door to the world. Since the reform and opening-up, China has become an indispensable party in major international institutions and negotiations which not only strengthened China's political involvement but also reinforced its economic, social and cultural contributions. 
Riding the wave of economic globalisation, China has successfully built a socialist market economy and a corresponding legal system by drawing upon common international practices and the good experiences of other countries in the light of national circumstances. 
The South Asian region, for various practical reasons, is very vital in China's foreign policy. In International relations, South Asia is undoubtedly emerging as an important region. After gaining independence from colonisation, South Asian region faced many struggles and conflicts in comparison with other regions. It is a living place of billions of people and consists of India, Pakistan, Bangladesh, Nepal, Bhutan, Maldives, and Sri Lanka. In 1985, leaders of these countries met in Dhaka for the first summit of South Asian Association for Regional Cooperation (SAARC) and showed to the world that there exists a spectacular region, called South Asia. Among the world's great powers, China not only shares the closest border with South Asian countries but also has good trade relations with them and their relations are based on good neighbourhood policy. 
China is one of Bangladesh's near neighbour. China's border is 100 kilometres (approximately 60 miles) from Bangladesh in the north over the Himalayas. The historical attachments between the ancient territory of China and Bengal can be traced back to two thousand years. A number of factors, including trade relationship through the southern Silk route, the exchange between these ancient cultures, and their knowledge and technologies have historically fostered the relationship. Since China recognised Bangladesh in October 1975, the countries have persistently promoted and deepened their political, economic, diplomatic and military relations. 
The ascent of bilateral relationship was dramatic and, in that way, China entered into a big way as a development partner in Bangladesh. Afterwards, Bangladesh's bilateral relationship with China has been guided by the key principles of China's foreign policy, which encompass the protection of sovereignty, the preservation of territorial integrity, the development of regional as well as international relations, and, thereby, ensuring international cooperation to advance domestic, socio-political, economic and cultural growth. The Sino-Bangladesh relationship has been termed by a Chinese expert as being a "trusted friendship or "all-weather friendship. 
In 2002, Bangladesh adopted a Look East policy to maximise economic and strategic gains that could emerge from closer relations with eastern countries, especially China. While this shift in policy was primarily aimed at trade diversification, Bangladesh also sought closer relations with China. Marking the 30th anniversary of diplomatic relation, 2005 was declared a China-Bangladesh Friendship Year. During Chinese Premier Wen Jibao's visit in April 2005, a 13-point Joint Communiqué on further strengthening of bilateral relations was signed, along with five agreements and two memorandums of understanding (MoUs). China also offered to assist Bangladesh in water management, nuclear energy, trade and investment, training of security and defence personnel, as well as infrastructural development. The Joint Declaration agreed to promote development, multidimensional and multilevel trade, and economic cooperation, while also allowing the Joint Economic and Trade Commission to develop and expand bilateral trade. 
Both the countries have already concluded a wide range of agreements regarding agriculture, trade, transport and communications, energy, science and technology, and military cooperation. China has made significant contributions especially in the areas of infrastructure development, trade and economy of Bangladesh. 
The economy of Bangladesh is largely dependent on agriculture. However, the Ready-made Garments (RMG) sector has emerged as the biggest earner of foreign currency. The textile industry accounts for over 82 per cent of Bangladesh's annual exports, which are valued at close to US$ 28.09 billion. With the dissolution of the Multi-Fibre Arrangement (MFA) on January 01, 2005, which ended textile export quotas for countries such as Bangladesh, and with China's entry into the World Trade Organisation (WTO), the garments industry of Bangladesh will now have to compete with China - the world's largest textile giant. China is considering the option of outsourcing textile jobs to Bangladesh where labour is available at half the cost, and with the comparative low wage levels. Chinese producers might also consider moving operation to Bangladesh. It has already emerged as the third largest trading partner of China in South Asia. While looking at the highlighted segments of Bangladesh-China bilateral trade, in 2003 alone, the total trade volume amounted to US$ 1.368 billion with an increase of 12.45 per cent from 2002. Besides, bilateral trade between these two countries arrived at US$ 3.0 billion in 2005 from US$100 million in 2002. As of 2009, the volume of trade between the countries stood at about US$ 4.5 billion. Bilateral trade volume in 2011 reached US$ 8.26 billion, with an increase of 17 per cent compared with 2010. Bangladeshi export to China reached US$ 449 million, an increase of 67.5 per cent. According to local media reports, Chinese investment in Bangladesh in 2011 amounted to over US$ 200 million. 
The year 2015 marked the 40th anniversary of the establishment of diplomatic ties between Bangladesh and China. In the past four decades, China-Bangladesh relations have undergone a speedy transformation. Trade between the two countries has grown rapidly, making China Bangladesh's largest trading partner, with the two-way trade accounting for about US$12 billion in 2014. In the last five years, imports from China grew at about 20 per cent and exports growth averaged at 40 per cent. A back-of-the-envelope calculation, considering a moderate exports and imports growth scenario, indicates that China-Bangladesh trade could reach US$ 30 billion. 
Despite healthy trade links between the two countries, there exists a huge trade surplus in China's favour. To reduce the disparity, under the auspices of the Asia-Pacific Free Trade Agreement (AFTA), China removed tariff barriers to 84 types of import commodities from Bangladesh and has been working to reduce tariffs over the trade of jute and textiles, which are Bangladesh's main domestic products. Moreover, in 2014, China offered duty-free access to some 7800 Bangladeshi products as a goodwill gesture in order to enhance economic ties between the two countries. 
A number of collaborative projects between Bangladesh and China have been announced in the last four months of 2016. In March, China granted Bangladesh 150 million RMB (US$ 23.8 million) in order to meet the latter's needs for setting up vital economic and technical cooperation projects, in collaboration with China. Additionally, 860 million RMB (US$ 133 million) has been provided by China in the form of a soft loan for the setting up of a Bangladeshi project, aimed at bringing all government offices across the country under one network. This project has been titled Development of National ICT Infra-Network for Bangladesh Government Phase. According to a statement released by the Economic Relations Division (ERD) under the Ministry of Finance, once this project is implemented, it will be possible to bring all government offices at district and sub-district levels under one network. This is also being seen as a stepping stone towards the implementation of current government's Vision 2021. 
Connectivity is essential to enhance mutual cooperation. In this regard, China and Bangladesh have been negotiating a highway project to connect Chittagong and Kunming through Myanmar. This highway would give Bangladesh an entry into the Mekong sub-region, which already includes China, accelerate trade and facilitate people-to-people contact. In 2012, Bangladesh took a move to construct the deep seaport on Sonadia Island under the south-eastern Cox's Bazar district. Bangladesh can play a major role in China's plan for reinforcing their trade routes, the Belt and Road initiative. A network of ports has been established by China, called the 21st Century Maritime Silk Road that extends from Chinese coasts through Southeast Asia, the Indian Ocean, and the east coast of Africa and through the Mediterranean to Greece. The Chinese Government has taken up the One Belt, One Road initiative to revive the ancient Silk Road connecting the country with Central Asia, Europe, Africa, Middle East, Southeast Asia and South Asia. China has invested US$ 40 billion in the Silk Road infrastructure fund. The China-Pakistan Economic Corridor (CPEC) and the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor are officially classified as "closely related to the Belt and Road Initiative". In addition, the Asian Infrastructure Investment Bank (AIIB), first proposed by China in October 2013, is a development bank dedicated to lending for projects regarding infrastructure. As of 2015, China announced that over one trillion Yuan (US$ 160 billion) worth infrastructure projects are in the planning or construction phase. AIIB has approved US$ 165 million in loans for a Bangladesh project - the first batch of loan for the country from the China-led development bank. 
One of the key challenges facing Bangladesh-China bilateral relationship is the existing high volume of trade gap between the two countries. Since the very beginning of bilateral trade relationship, Bangladesh has long been suffering from huge trade deficits with China. Despite the power gap between China and Bangladesh, the two countries have shown clear commitment over the years to build "a positive, cooperative and comprehensive relationship that would surely pick up the momentum in future. Indeed, Bangladesh's relations with China over the next decade clearly present a host of op-portunities. It may be expected that in the coming years, Bangladesh and China will hopefully overcome the existing constraints in their relationship, and achieve a truly beneficial and strategic partnership, conducive to the establishment of a peaceful and prosperous South Asia. For this to occur, Bangladesh needs to ensure that its foreign policy is informed by a strategic vision as well by economic considerations that realistically gauge the direction of regional and international changes.
Dr. Borhan Uddin Khan, Professor and Chairman of Department of Law, University of Dhaka.
 

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