China yet to turn into big export destination

China could not become a potential export destination for Bangladesh despite offering generous preferential trade benefits for the past decade or so.

On the other hand, two Asian countries, India and Japan, have proved to be very good export destinations for Bangladesh over the years.

Bangladesh's exports to Japan reached $1.69 billion in the July-May period of the immediate past fiscal year and stood at $1.90 billion in fiscal year 2022-23, according to data from the Export Promotion Bureau (EPB).

The export of local merchandise to India reached $1.67 billion in the July-May period of the immediate past fiscal year and $2.12 billion in fiscal year 2022-23.

The shipment of goods from Bangladesh to China reached $761.02 million in the July-May period of the immediate past fiscal year and $677.35 million in fiscal year 2022-23.

The exports to China did not grow that much in spite of the presence of a zero-duty benefit for 98 percent of Bangladeshi products.

But China has eventually turned into the largest import destination for Bangladesh, with annual imports reaching over $23 billion, according to data from the commerce ministry.

In 2015, China offered various least developed countries (LDCs) extensions on the trade benefits for up to 97 percent of their goods and later the percentage was elevated to up to 98 percent for Bangladesh.

The share of China in Bangladesh's imports has risen from 10.3 percent in FY02 to 26.4 percent in FY22, according to a study by Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), made public last month.

Imports from China rose from less than $1 billion to more than $23.5 billion in FY23. Imports from China are important for Bangladesh's export growth and domestic industries as well for consumers.

A significant portion of imports from China come through bonded warehouses duty free as those are used in the export industry.

One of the main reasons for exports not increasing to China is a lack of product diversification.

Because China itself is the largest apparel and textile supplier worldwide occupying more nearly 32 percent of the global share.

China imports $10 billion worth of garment items in a year from all over the world while Bangladesh's main export item is garments which typically contributes more than 84 percent to national exports in a year, according to the paper.

China and Bangladesh are holding dialogues for signing a free trade agreement (FTA) to increase trade and investment, with the first round of negotiations likely to begin during Prime Minister Sheikh Hasina's visit to China next week.

Bangladesh currently accounts for just 0.04 percent of China's imports. A share of 1 percent would translate to export earnings of $26 billion for Bangladesh, Razzaque said in his study.

In case of garments, Bangladesh's market share in China is just 4 percent. In contrast, Vietnam has an 18 percent share, the study also said.

The study also found that China's investment in Bangladesh's export-oriented sectors would be very helpful.

Due to the heightening of geopolitical tensions, Bangladesh could be an ideal destination for investment in export-oriented manufacturing production, it said.

An FTA with China will be extremely beneficial, considering the medium to long-term export interests of Bangladesh. In such an FTA, due attention should be given to trade in services and technology transfer, it added.

However, Bangladesh needs to improve on its exports to China. An FTA with China with provisions for complementary investment inflows into Bangladesh's export sector will be very much impactful, said the study.

Meanwhile, China should extend its duty-free market access benefits for Bangladesh. In an FTA, the less-than-full reciprocity principle should be followed in favour of Bangladesh, it said.

Once the FTA is signed, the use of the duty-free benefit can be thoroughly utilised, Al Mamun Mridha, secretary general of the Bangladesh China Chamber of Commerce and Industry, told The Daily Star yesterday.

The trade gap between Bangladesh and China is big because the local exporters, especially the garment exporters, import the raw materials from China to re-export to other countries, Mridha also said.