The Bangladesh government considers Prime Minister Sheikh Hasina’s visit to China as “very significant,” in the context of the current geopolitical situation and harsh reality of economic headwinds.
Analysts say the possible loan in Chinese currency needs to be multi-dimensional for Bangladesh, as it will help the country maintain a balance in economy and trade.
Prime Minister Sheikh Hasina is leaving Dhaka for Beijing on a four-day state visit today. This bilateral visit to China came right after an official trip to India. Dhaka-Beijing will complete 50 years of diplomatic relations next year.
This bilateral state visit comes a year ahead of the golden jubilee celebrations of the two countries' diplomatic relations.
Bangladesh's trade relationship with China is multi-dimensional. As a single country, Bangladesh is the largest importer of goods from China, and China has been a member of Bangladesh's billion-dollar club in terms of lending for the past few years.
Beijing is interested in lending Bangladesh $5 billion in Chinese currency, while Dhaka seeks a guarantee of multi-dimensional utilisation. If this happens, the use of foreign currency can be reduced and trade with China will be smoother.
This will be a great relief to Bangladesh at a time of ongoing economic and foreign exchange crises.
In the official meeting with Chinese Premier Li Qiang in Beijing, issues such as financial assistance to meet Bangladesh's budget deficit and financing of new projects will get importance.
Apart from this, there should be fresh agreements on more issues, including the Free Trade Agreement (FTA).
Speaking to The Business Post, economist Mustafizur Rahman said, “Prime Minister Sheikh Hasina is likely to discuss several key issues during her visit to China, including loans and opening letters of credit (LCs) in Yuan.
“Bangladesh's trade deficit with China is significant. So when we take a loan in Chinese currency, multi-dimensional use of this loan is guaranteed. And to trade in Yuan, we need to have enough supply of this currency.”
He then pointed out, “So, the government should receive Chinese loans, project assistance, and grants denominated in Chinese Yuan. Then the demand for Chinese currency will increase, and we will have a sufficient supply of Yuan to open LCs.
“This is a crisis in terms of India, and this is why the taka-rupee trade is not gaining momentum.”
Infrastructure and credit demand
Twenty-seven agreements were signed during Chinese President Xi Jinping's visit to Dhaka in 2016. This included around $25 billion in grants, loans and other agreements. Along with contributions to the private sector, the figure totalled $40 billion in commitments.
Although Bangladesh could not take this entire amount of loan from China, in light of those agreements, several mega projects are being implemented in Bangladesh with Chinese funds.
During Prime Minister Sheikh Hasina’s visit to China, Bangladesh will ask Beijing to help in the implementation of many more projects on roads, bridges and railways. Besides, Bangladesh can get a loan of $5 billion from China to deal with the economic crisis.
This loan will be used to implement Bangladesh's infrastructure projects and meet the budget deficit.
In the meantime, nine project funding proposals of the Ministry of Roads and Railways have been sent to the Ministry of External Affairs, including a project to build rail tracks through Barishal to Payra Port and Kuakata along with the Padma Bridge rail link.
Besides, insiders say China’s financing may be sought for the implementation of a project under metro rail.
Nearly 20 instruments on cards
Prime Minister Sheikh Hasina will hold an official meeting with Chinese Premier Li Qiang at the Great Hall of Beijing on Wednesday, the third day of her visit to China.
After that, in the presence of the two leaders, preparations are underway to sign about 20 instruments on various issues – including several memoranda of understanding (MoUs) between the two countries.
Notable among these are – economic development policies, support for investment in the digital economy, trade and investment cooperation, health sector cooperation, renovation of existing China-Bangladesh friendship bridges, and construction of a new China-Bangladesh friendship bridge, sharing of advance information on the flow of Brahmaputra, cooperation between Awami League and the Communist Party of China (CPC), cooperation between two agricultural universities of the two nations, and environmentally friendly energy.
There is also a possibility of Bangladesh signing MoUs with China regarding cooperation in the Global Development Initiative (GDI) and blue economy.
Bangladesh’s agenda
During the official visit, Bangladesh may highlight its foreign policy, especially the position of Bengalis in the region, in relation to China. Besides, since China's relationship with Myanmar is good, Bangladesh will seek China's cooperation with Rohingya repatriation.
Former foreign minister and incumbent Chairman of the Parliamentary Standing Committee on Foreign Affairs AK Abdul Momen said, “Myanmar has a good enough relationship with China, we can request them to help us in this regard.
“So we can send the Rohingyas back home through dialogue and discussion.”
He added, “Another thing is to increase our industrial capacity. Here is how public-private partnerships can help us. We want them [China] to do business with the private sector. But we don't want any defence pact in this area, we just want development.
“Basically, we do not want to be on bad terms with any country.”
Momen continued, “Most of China's trade is through the Indian Ocean. So, Bangladesh believes that the Indo-Pacific region will be open to all, and access will be based on international rules for the development of all countries in the region.”
Teesta project
During Prime Minister Sheikh Hasina’s visit to China, Bangladesh may discuss with which country it should cooperate in terms of investment and implementation of the Teesta project.
And this topic may be raised from the Chinese side. Meanwhile, after India's proposal on the Teesta project came forward, Bangladesh can tell what will happen to China's proposal for this project in this summit meeting.
However, insiders do not believe that anything will happen very quickly.
MunshiFaiz Ahmad, the former ambassador of Bangladesh to China, said, “Bangladesh can bring in both countries in the Teesta project if it wants. China is Bangladesh's largest trading partner and Bangladesh receives major investment from the country.
“Therefore, since the project is large, some part of the project may be requested to be done by India and some part by China. There will be a discussion about how China is thinking about these issues.”
Former foreign minister AK Abdul Momen said, “A decision on the Teesta project will be made on the basis of discussion and dialogue. China says it can pay around $800 million, while India is also offering their support. We have no quarrels with anyone.”
Caution on Chinese debt
China is currently among the top five lenders to Bangladesh. In terms of loans received through bilateral discussions, China is right after Japan and Russia.
Since the Chinese president's visit to Bangladesh in 2016, lending has increased rapidly. In the last four fiscal years, Bangladesh received $3 billion from China. This time, many big projects have been proposed seeking large amounts of loans.
Assessing China's debt risk and foreign debt situation, economists have advised caution on debt from China.
As economic analysts are wary of Bangladesh's relationship and debt with China, neighbouring and Western countries are wary of whether Bangladesh is becoming dependent on China.
Addressing this particular issue, former foreign minister AK Abdul Momen said, “Bangladesh is cautious about taking loans. Bangladesh needs China for infrastructure development and project implementation.”
Meanwhile, economist Mustafizur Rahman said, “If we can do trade with China in Yuan, we will be able to reduce the use of foreign currency. Such an agreement may come, along with budget support.
“We have heard that Bangladesh will ask for a budget support of $5 billion. If received, it will give us great relief amid the ongoing situation.”
He then said, “Particularly, in Bangladesh’s geopolitical position, China sees a great partnership opportunity. I think there will be a discussion on how we can move forward with China as a partner in our plan for integrated development in the southern region.
“When we leave the criterion of a less developed country in November 2026, China may continue to give us the benefit of a zero tariff market. We can also start negotiating a free trade agreement, or a comprehensive economic partnership on a larger scale.”
