China-Bangladesh Relations: A New Opportunity or Emerging Concern? (IANS Analysis)

New Delhi, March 31 (NationPress) The Chief Advisor of Bangladesh’s interim government, Muhammad Yunus, recently undertook a four-day official trip to China, marking the first bilateral interaction since he took office. The Press Secretary for the Chief Advisor described this as “the most significant visit” by a Bangladeshi leader in the last fifty years, underlining the importance of this engagement for Dhaka. Following Sheikh Hasina’s leadership, Bangladesh has adopted a notably different stance regarding its neighborhood relations while its ties with China have remained similar to that of the previous government.

This brings forth the inquiry: will China's renewed engagements present a new opportunity for Bangladesh, or will it lead to fresh concerns?

Beijing's increasing interaction with Dhaka began during Sheikh Hasina’s administration. It was during her second term (2009-2024) that bilateral relations achieved remarkable milestones, with Bangladesh becoming an “all-weather friend” and a strategic partner, culminating in a comprehensive strategic cooperative partnership just before Hasina’s removal last August.

In 2015, China outpaced India to become Bangladesh’s largest trading partner, a title it still holds today. Dhaka's extensive borrowing from Chinese loans over the past decade for ambitious large-scale infrastructure initiatives has led to significant challenges for Bangladesh, pushing it towards a potential debt trap.

The interim government has inherited a fragile economy grappling with soaring inflation (including food inflation), dwindling foreign exchange reserves, and a dollar crisis. This, along with the interim administration’s evolving relationship with India, indicated that rekindling ties with China was urgently needed.

For China, a post-Hasina Bangladesh appeared as a new chance to promote a more pro-China Bangladesh, especially in areas where the former government favored India, notably concerning the Teesta project.

With this in mind, China has adopted a cautious and strategic approach with Dhaka. As a demonstration of its ‘non-interference’ policy, Beijing has sought to engage with not only the interim government but also various political parties across the spectrum (except for the now marginalized Awami League) through ‘heavy endorsement’.

The message was clear: Beijing is open to collaborating with any party that ascends to power in Bangladesh.

With elections scheduled between December and June, albeit without a definitive roadmap, the Chinese Communist Party has initiated party-to-party dialogue by inviting representatives from several political parties to visit China.

A four-member BNP delegation and a 14-member group from four Islamic parties, including Jamaat-e-Islami Bangladesh, visited China separately last November, while a 22-member delegation led by the BNP and allied parties concluded their visit last month. During this latest trip, the BNP even committed to strengthening ties with China, if elected, “to balance and bring equilibrium to” the country’s geopolitics, considering Bangladesh is surrounded by a “big and powerful country”.

China aims to reinvigorate its long-stalled BRI projects in Bangladesh. Recently, Beijing has expressed interest in investing in Bangladesh’s renewable energy sector. Conversely, Bangladesh aspires to attract more Chinese investments, which it believes will aid in diversifying its economy.

This is the primary objective of Yunus' visit to China.

Additionally, Bangladesh seeks to diversify its trade and investment with China, encompassing medical tourism, defense, and investments in the green energy sector.

However, it is crucial to remember that about 59% of Chinese-funded projects in Bangladesh have shown significant ESG risks, resulting in unsatisfactory performance.

While discussions concerning the necessity for enhanced defense cooperation with China are circulating, given that Dhaka is the leading recipient of China’s global arms exports, reports regarding quality issues in these imported military equipment should also be considered.

Moreover, the substantial trade deficit, even with zero-duty trade benefits, indicates that merely diversifying economic relations with China will not resolve Dhaka’s ongoing economic challenges; rather, a shift in China's economic policies regarding bilateral relations with Bangladesh is required.

In January, Bangladesh's foreign advisor visited Beijing to request China to reduce its interest rates from 2-3% to 1%, waive commitment and management fees, and extend loan repayment terms from 20 to 30 years.

While Beijing has tentatively agreed to extend the repayment period, the reduction in interest rates remains unresolved.

It is essential to note that China constitutes 10% of Dhaka’s annual borrowing, with external debt to China accounting for 9% ($6 billion) of its total external debt.

This share of bilateral external debt is highest with China, constituting 24%. Given the short loan repayment duration compared to other international organizations, coupled with delays in loan approval and disbursement, have already inflated Bangladesh’s costs in its major development projects, such as the Dhaka-Ashulia Expressway.

Thus, it remains uncertain if China will adequately address Bangladesh’s primary economic concerns.

As Bangladesh anticipates this visit to herald a new transformation and ‘mutually beneficial’ bilateral relations, the historical context of Dhaka’s dealings with Beijing has been heavily favorable to China.

Consequently, Bangladesh should adopt a cautious stance towards China. It should not invite further economic distress in the name of diversification, lest it faces the same fate as Sri Lanka.