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Chinese investment may close trade gap

  • Published at 02:15 am October 14th, 2016
  • Last updated at 02:27 am October 14th, 2016
Chinese investment may close trade gap
Chinese President Xi Jinping lands in Dhaka today. The visit is expected to be accompanied by $40 billion in loans and grants to the country. According to Bangladesh Bank provisional data, in the fiscal year 2015-16, Bangladesh imported products worth $9.64 billion from China against its export of $808 million. The total trade gap between two countries stood at over $8.8 billion. In the last fiscal, Bangladesh sold China $341 million worth of clothing products. “China’s investment in producing textile machinery and RMG backward linkage industry will help Bangladesh reduce the trade gap as manufacturers will have machinery and raw materials, especially fabric and other related products for the RMG sector, at a more affordable price,” Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy told the Dhaka Tribune. Currently, Bangladesh has to import 70% of the fabric for the woven sector and establishing factories in this field could help importers by supplying from the local source, Salam said. In the years to come, the demand for RMG raw materials will increase as the production capacity will also increase to meet $50 billion export target by 2021. To meet the growing demand, Bangladesh needs investment from home and abroad, he added. “Investment in RMG backward linkage by China will help Bangladesh reduce trade gap at least to some extent. But investment in technology and machinery production is not an easy feat,” AB Mirza Azizul Islam, former finance adviser of a caretaker government told the Dhaka Tribune. Bangladesh has to concentrate on increasing exports to China and in this case, it has to look into the rules of origin and see if there is any problem that hampers export, said Islam. “Meanwhile the government will have to ensure utility services,” he said. “China should come with big investment plan here. They can relocate those sectors to Bangladesh that are not cost effective due to higher labour costs in China,” former FBCCI president Mir Nasir Hossain told the Dhaka Tribune. There will be a trade gap but Bangladesh has to reduce it by utilising the opportunities and trade advantages offered by China, said Nasir. “Since China is the number one import destination for Bangladesh, we have to look into the market diversification as well as products to reduce trade gap,” he added. “We should also focus on goods that China imports for their local consumption.” In a recent comment, Chinese Ambassador in Dhaka Ma Mingqiang said that the country may well be the top investing country in Bangladesh as the current relation between the two countries had reached an unprecedented level. The trade analysts and business leaders urged the government to remove trade barriers and bottlenecks in attracting Foreign Direct Investment (FDI) here, which has remained sluggish. According to BB statistics, net inflow of FDI from China increased by 5% to $52.37 million in FY16, which was $49.84 million in the previous fiscal.