Trade gap with China widens, opportunities unexplored

Bangladesh’s trade gap with China stood at $17.83 billion in FY22, an increase from $12.24 billion when compared year-on-year, despite the country providing duty free market access for 98 per cent of Bangladeshi goods.

Export Promotion Bureau (EPB) data show that in FY22, Bangladesh exported goods worth $683 million to China, and imported products worth $18.5 billion from there. Bangladesh got the zero tariff facility in July 2021, but instead of dipping, the trade gap with China jumped further.

When contacted, EPB Vice Chairman AHM Ahsan told The Business post, “Demand and supply is the main issue in international trade, and we failed to manufacture goods which have the demand in China. This is why we failed to cash on the duty-free facility.”

Ahsan furthered, “To boost export, we are thinking to organise a single country expo in China, it could be next year.”

A number of industry leaders and experts say Bangladesh is struggling to cash in on this opportunity because of a lack of products in its export basket, proper knowledge, strong marketing, value addition, and diversification of goods.

They added that many top exporters – though curious about the Chinese market – do not even know which goods can be exported to the country, and what is the proper method for this process.

Speaking to The Business Post, Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem said, “China is offering duty-free market access to Bangladesh, but they have also set a condition for 40 per cent value addition.

“It is difficult to meet the condition when the value addition for the majority of Bangladesh’s goods is less than 30 per cent.”

Echoing the same, Research and Policy Integration for Development (RAPID) Chairman Mohammad Abdur Razzaque said, “Poor marketing and a limited product basket are also behind Bangladesh’s failure to boost exports in China.

“Bangladesh needs an aggressive marketing strategy, product diversification and Chinese investment to better penetrate the Chinese market.”

Bilateral trade with China

Bangladesh is enjoying a zero tariff facility in China for 8,256 products, including for readymade garment (RMG) goods, jute and jute goods, leather and leather goods, frozen fish, agriculture products and light engineering items, since July 1, 2021.

Bangladesh’s foreign ministry sources claimed that China is also planning to offer this facility to 383 new products on the list.

According to EPB data, Bangladesh exported goods to China worth $683 million in FY22, $681 million in FY21, $600 million in FY20, $821 million in FY19 and $695 million in FY18.

Meanwhile, Bangladesh imported goods worth $18.5 billion in FY22, $12.93 billion in FY21, $11.49 billion in FY20, $13.63 billion in FY19 and $11.69 billion in FY18 from the country.

An analysis of the abovementioned figures reveal that Bangladesh’s bilateral trade gap with China rose to $17.83 billion in FY22 from $12.24 billion in FY21, $10.89 billion in FY20, $12.81 billion in FY19 and $11 billion in FY18.

In FY22, Bangladesh exports to China comprised of RMG products worth $222 million, jute and jute goods $170 million, leather and leather goods $82 million, fish and crustaceans $17.5 million, plastic goods $14 million, cotton $14 million, footwear $17 million, feather $31 million, iron and steel $20 million, and copper and aluminium $27 million.

China imported goods worth around $2 trillion last year, and their key import items are science and technology goods, according to German-based research firm Statista.

Of China’s overall imports, electrical machinery and equipment occupied 25 per cent, ores, slag and ash 10 per cent, mechanical appliances 9 per cent, plastics 3 per cent, RAPID data shows, adding that Bangladesh’s exporters should focus on exporting these goods.

RAPID Chairman Razzaque said, “Bangladesh’s share in China’s overall imports is a minuscule 0.04 per cent, and if Bangladesh can raise its share just 1 per cent, the country would earn $27 billion in additional exports.

“Competitor countries, including India, Malaysia, Myanmar, and Vietnam, have done well in China by diversifying towards these items.”

Reasons behind low performance

Experts blamed Bangladesh’s low integration with retailers and a lack of participation in marketing, sales and after-sale services as major barriers to export success in the Chinese market.

Research and development (R&D), design, branding, manufacturing, distribution, marketing, sales, and after-sales services are different stages of the value chain.

The apparel sector is a strong export item for Bangladesh, and the country earned above 83 per cent of its total earnings from this sector. On the other hand, China is the top RMG exporter in the world, and the country imported just $10 billion of readymade garment items last year.

“The market is too critical and the apparel sector has a few opportunities to boost exports in China,” Nipa Group Managing Director Md Khosru Chowdhury told The Business Post.

Bangladesh Jute Goods Exporters Association Director (BJGEA) Esrat Jahan Chowdhury said, “Despite a huge demand for jute diversified goods and handicraft items in China, we failed to boost our exports due to language and other communication issues.”

Tajin Leather Corporation Managing Director Ashikur Rahman said, “China is our top processed leather market, but we are getting around 50 per cent less prices from them due to the Leather Working Group (LWG) certification issue.”

How can Bangladesh boost exports?

CPD’s Khondaker Golam Moazzem said Bangladesh should develop a long-term strategy for promoting exports to the Chinese market.

RAPID research reveals that 60 per cent of Chinese consumers like to buy high-end products, and 49 per cent prefer to purchase premium products from overseas retailers online.

Besides, China is the largest e-commerce market in the world, and it contributes 38 per cent to China’s GDP.  Bangladeshi exporters can establish links with Chinese e-commerce, delivery channels, and logistics suppliers, the research recommended.

Experts said Bangladesh should set up export pavilions in China, business-to-business (B2B) collaborations, engage the Bangladesh Embassy in China in export promotions, and establish links with retailers as part of its strategy to boost trade.

Additionally, local industries can participate in and host trade fairs with the Bangladesh government’s support.

BJGEA’s Esrat said, “If the EPB organises several exhibitions in China, we will be able to capitalise on the opportunity.”

A trade agreement can help boost investment-backed export promotion. To stimulate the supply response, Bangladesh must attract Chinese investment. Due to the growing geopolitical competition, China must also diversify its supply networks, stakeholders say.

RAPID’s Razzaque said, “With the support of Chinese finance, Bangladesh must expand its product line beyond apparel.

“We should pay special attention to developing export supply capacities in electric machinery and equipment, plastic, leather items, footwear, and iron and steel-based manufacturing.”

CPD’s Moazzem said, “If Bangladesh can reduce the value-addition ratio by negotiating with China, exports will certainly go up. But there is no alternative to increasing the number of products in the export basket.”