China Rolls Out Red Carpet to Bangladesh on Its Silk Road, But What’s In It for the Dragon? 2

When measured in terms of goods trading, China is Bangladesh’s top trading partner. However, the relationship is heavily skewed in favor of China as it exports far more to Bangladesh than it imports. While China is only the tenth largest export destination for Bangladesh in fiscal 2016-17 so far, it is the top import source for the country.

During a visit by China’s President Xi Jinping in October 2016, companies representing the two countries signed trade and investment deals amounting to $13.6 billion. Supporting loan agreements to the tune of $20 billion were also reached.

Since China already has a favorable trade relationship with Bangladesh, why is it making such a public appeal to do more business with the country – mostly investments – via the One Belt, One Road (OBOR) initiative?

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Reason for China’s interest

The broad-based reason for pushing OBOR is increasing its influence in the Asia-Pacific region. At a time when countries have increasingly started looking inward, China is trying to expand its influence.

But as far as Bangladesh’s particular case is concerned, China considers it strategic due to its geographic location. As noted by Avia Nahreen in an article published by The Daily Star, “Around 80 percent of China’s energy imports from the Middle East pass through the Strait of Malacca, which is a narrow stretch of water connecting the Indian Ocean and Pacific Ocean.”

China wants to both, increase its influence in the Malacca trade route, as well as decrease dependence on it. Bangladesh figures prominently in both strategies. Its strategic location in the Bay of Bengal is important to the Chinese, who are investing in the country to exert influence over Bangladesh. An trusting alliance between the two nations could become critical if India were to try to block the Malacca route.

Another reason why the country is important to China is because of its cheap labor. As seen in the second article of this series, Bangladesh is eyeing some of the lower value manufacturing business that could become less strategic for China to retain domestically. By investing in Bangladesh, China gets a ready and willing destination to relocate select labor-intensive industries yet still retain a degree of control over them.

What Bangladesh will need to assess is the costs, political and economic, associated with the benefits coming from China. Until such time there’s a positive short-term benefit of the relationship for Bangladesh as it uses the resources to strengthen its economy and continue on a 7%+ growth path.

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