Bangladesh will continue to enjoy “Zero-Tariff” access in the Chinese market after finally graduating from the least developed country (LDC) status in 2026, Chinese ambassador Yao Wen has said.
Responding to journalists at an event titled “Spring Dialogue with China,” organised by the Chinese Embassy in Dhaka on Tuesday evening, he added, “The arrangement of 98 per cent duty-free and quota-free access for Bangladesh in China became effective in September last year.
“Bangladesh’s graduation from the LDC status is good news for us, and will have no effect on our existing arrangement. Regardless of Bangladesh’s graduation, the facility will continue.”
China, in January last year, announced duty-free access to 98 per cent of Bangladeshi products including 383 new products, especially leather and leather-made goods, in its "zero-treatment" list. The facility came into effect last September.
This decision from China, the largest Asian economy, had increased the number of Bangladeshi products enjoying the "duty holiday" facility to 8,930.
China is the top sourcing country for Bangladesh, but the country’s exports are not increasing at an expected level. Industry leaders are optimistic that as Bangladesh’s duty-free market access in China continues after LDC graduation, exports could go up significantly.
According to the Bangladesh Bank and Export Processing Bureau (EPB) data, bilateral trade between Bangladesh and China rose 61.72 per cent between FY18 and FY22.
Bangladesh’s import payment to China was $11.69 billion in FY18, which increased to $19.34 billion in FY22. Meanwhile, export income from China was $ 0.69 billion and $0.68 billion respectively in the same period.
The balance of trade between the two countries is not being maintained as the export amount is significantly low compared to the imports of Bangladesh from China.
In this regard, the ambassador said China has never deliberately pursued a trade surplus with Bangladesh. The unbalanced trade is a result of unmatched industrial development.
To improve industrial development, China wants to help Bangladesh. As part of this effort, China gave duty-free market access, expressed interest in FTA and will boost investment in Bangladesh.
“China wants to increase investment in Bangladesh, especially in RMG, ICT, green energy and food processing,” he added.
Bangladesh wants to make a free trade agreement (FTA) or preferential trade agreement (PTA) with different countries to prepare for LDC graduation.
In this regard, Yao Wen said, “We are preparing a joint study report, and hope it will be ready very soon. Hopefully, in the near future, we will move forward for a FTA, and then Bangladesh’s exports will increase in our county.”
The Bangladesh Bank permitted banks to open foreign currency accounts in Yuan last September, so banks now can open letters of credit (LCs) using Chinese currency. The decision follows requests from China, and calls for using alternative currency amid the USD supply crunch.
In response to journalists’ questions, the Chinese ambassador said bilateral trade transactions by the two countries' own currencies are a very technical issue. More discussions and experimentation is required on this topic.
China is one of Bangladesh's development partners. Several mega projects including Padma Bridge Rail Link, and Karnaphuli Tunnel are being implemented with China's loan assistance.
According to the Economic Relations Division (ERD), since diplomatic relations with the country began in 1975, it has disbursed about $6.44 billion in loan assistance to Bangladesh until FY22.
There are rumours that China's debt puts the country into a debt trap. However, the Chinese ambassador dismissed such statements.
He pointed out, “The so-called China debt trap is groundless. China’s aid to other countries respects the sovereignty of recipients. We neither interface in the internal affairs, nor attach any political conditions to the aid.
“The amount and terms of the loan agreement are negotiated with the recipient in advance and crystallized in a framework agreement.”
According to the Ministry of Finance, as of FY22, debt to China stood at only 8 per cent of Bangladesh’s external debt, and China ranks fifth among all of Bangladesh’s development partners.