Despite the duty-free market access for 97 per cent goods, Bangladesh could not seize the opportunity for most of last year because of a lack of diversified goods and the fallouts of the coronavirus pandemic.

Beijing extended the duty-free access to 97 per cent of Bangladeshi goods in July last year, bringing 8,256 products under the tariff-free regime. Shipment to China stood at $566.15 million in 2020, according to data from the Export Promotion Bureau (EPB). It was $238.77 million in the January-June period and rose to $327.38 million in the second half.

“The export to China in the second half was supposed to jump massively because of the duty privilege. But unfortunately, the fallouts of the Covid-19 impacted the overall business badly last year,” said MA Razzaque, research director of the Policy Research Institute of Bangladesh (PRI).

Every year, China imports $2.1 trillion worth of goods from all over the world and the amount is expected to double within the next seven to 10 years.

“If we can increase our export contribution to China to 1 per cent, Bangladesh’s export to China will be $26 billion in a year,” said Razzaque.

“So, retaining the duty-free access in this market is very important.”

The duty benefit was extended to Bangladesh at a time when China’s consumer market is set to expand by 12 per cent every year to reach $8.4 trillion by 2022. Studies suggest that because of its vast population, the Chinese consumer market will overtake America’s by 2034.

But Bangladesh’s export to China does not reflect the startling transformation the world’s second-largest economy is currently going through, although the country is an old and has been a promising trading partner for years.

Bangladesh’s contribution to China’s annual import is only 0.05 per cent compared to 3 per cent of Vietnam.

In 2000, China contributed 7 per cent to the annual growth in consumer spending worldwide.

By 2040, China will contribute 44 per cent of the global figure, which is 3.5 times the expected contribution of the US, and 2.7 times the combined contribution of the whole of the rest of Asia, according to Oxford Economics, a research firm.

Razzaque said Bangladesh should proactively seek Chinese investment along with technological knowhow.

If Bangladesh can strengthen the bilateral trade, exploiting the potential in other member countries of the Regional Comprehensive Economic Partnership (RCEP) will also be possible as China is leading the trade bloc, he said.

After the Covid-19-induced supply chain shocks, for which heavy dependence on China was identified as a key reason, Chinese entrepreneurs are exploring other investment destinations to keep their access to the global market open.

“This could be an opportunity,” Razzaque said.

Foreign direct investment stocks in Vietnam and Indonesia rose rapidly to $161 billion and $232 billion, Razzaque said.

“Investment saturation points are being reached because of a shortage of cheap labour and a lack of generous policy support. Therefore, investors are looking for other countries with potentially large supply-side capacities.”

“In this context, the duty-free market access will be a great advantage for Bangladesh. Bangladesh should have a special focus eyeing Chinese investment,” he added.

Bangladesh is yet to raise its export to China to $1 billion whereas the shipment to Japan and India has crossed the mark.

Historically, the export to China is very low.

For instance, exports to China from Bangladesh were $746.2 million in the fiscal year of 2013-14. The amount reached to its highest level of $949.41 million in 2016-17. It dropped to $694.97 million in 2017-18.

The export of garment, the main items going to China, is still very slow although it is growing.

In 2008-09, Bangladesh shipped $9.49 million worth of garment to China. It rose to $506.51 million in 2018-19.

Annual average growth of garment export to China was 48.85 per cent between 2008-09 to 2018-19. It fell in 2019-20 due to the pandemic as export came down to $330 million, according to data from Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“We are greatly thankful to the government of China for extending the duty-free access to 97 per cent of the tariff lines to the least-developed countries,” BGMEA President Rubana Huq said.

The duty-exempted products include 299 garment items.

“The export of garment to China can’t be said slow as progress is happening. However, the enhancement of product coverage appears to be insignificant in terms of our trade coverage,” she said.

Under the Asian Pacific Trade Agreement (APTA), Bangladesh used to get duty-free access for 226 products. So, only 73 products are newly added, Huq said.

Bangladesh exported 151 types readymade garment items to China in 2019-20 worth $ 330 million. Of them, 89 types of products worth $185 million had duty-free access under the APTA.

The latest duty-free access has granted the tariff-free market access to 19 types of RMG items. There are 43 items that need to pay duty at varying rates.

“Given the limitation of our product basket, we would only be able to take more benefits of the duty-free access to China if we can diversify products, or enhance our exports within the duty-free covered items which is already happening,” Huq also said.

Bangladesh imports almost half of its raw materials and capital goods from China.

It imported $10.84 billion worth of textile and textile articles in 2018-19. China’s share was 46.31 per cent, or $5.02 billion, BGMEA data showed.

Only for cotton, the country brought in $2.2 billion worth of the raw material from China, which 31.84 per cent of the total of $6.9 billion.

“We need to pursue Chinese investment. There is a pledge of Chinese investment worth $27 billion in Bangladesh in different sectors, but so far only $3 billion was invested in,” Razzaque said.

Leather and leather goods are a potential sector that can attract Chinese investment. China could be a very good export destination for the country’s leather and leather goods export.

Md Saiful Islam, president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh, said the 97 per cent package included local leather and leather goods but the value-addition is very high, an area where Bangladeshi manufacturers have to face difficulties.

Since China is trying to make the most of Bangladesh’s market access to the world, investment from the country is gradually coming to Bangladesh.

“We encourage Chinese investment in the leather and leather goods sector as it will create jobs, transfer technology and know-how and brand Bangladesh,” Islam said.

Azizul Akil David, senior vice-president of the Bangladesh China Chamber of Commerce and Industry, said the duty-free package is a big opportunity for Bangladesh.

The package also includes agricultural and fish products.

“The export of agricultural and fish items means more local value-addition. We need to explore and exploit Chinese markets sincerely,” he said, adding that the wide trade gap will narrow if Bangladesh can export more.

Currently, China is the largest sourcing destination for Bangladesh, which buys $14 billion worth of industrial raw materials and food items every year.

Md Jafar Uddin, commerce secretary, said: “We have started enjoying the duty benefit from China.”   



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