Every year nearly a fifth of the goods Bangladesh buys come from China, but its exports to China remain below a dismal 1 percent of what the global economic superpower imports annually.
For example, goods worth $11 billion of the total $50 billion annual imports were from China in the 2019-20 fiscal year. On the other hand, Bangladesh could only export goods worth $600 million to China, whose imports from other countries in that financial year totalled $2.4 trillion.
According to Bangladesh Bank and Export Promotion Bureau, China is among the top countries Bangladesh imports goods from, but it is the 15th on the list of export destinations.
For the last five years, the trade deficit ratio with the major trade partner of Bangladesh hovered between 1:10 and 1:20. Economists, however, suggest that Bangladesh can increase export to China several times over if only it makes full use of its current capacity.
That would require a greater focus from the local businesses, Bangladesh’s branding in China, utilisation of the tax-free options and developing the qualitative standards including the testing labs.
Experts always ask if Bangladesh has the appetite to carve a niche for itself in the second largest economy of the world. Focusing on that point, the policymakers, business community, exporters and economists have been planning and preparing a stretegy to enhance Bangladesh’s export to China.
Amid the yawning trade gap between the two countries, China has allowed tax-free import of 97 percent of Bangladeshi goods under its tariff line from July 2020.
The Chinese initiative will generate interest among Bangladeshi exporters and they will focus on goods that China is interested to buy, believes Commerce Secretary Tapan Kanti Ghosh. “Those lacking the capacity (in export trade) will work to enhance it,” he said.
The tariff free offer will help narrow the trade gap down with China, exporters hope. They say they are continuing to plan and prepare to achieve the goal.
A small increase in overall partnership will fetch huge money for Bangladesh, Professor Abdur Razzak, director of Policy Research Institute, observed in a recent meeting.
Bangladesh can add $20 billion to $25 billion to its export earnings if it can capture only 1 percent of China’s import, according to him. This should be the goal for the next decade (2021-2030), he believes.
Razzak prepared a gravity model based on the current economic activities that shows the import to China can be pushed up to $4 billion from the current $1 billion in a matter of months.
Another study by the International Trade Centre shows Bangladesh is putting just 30 percent of its capacity to use to export goods and products to China. Cranking up the capacity and widening the export basket will create greater opportunities on the market in China.
WHAT EXPORTERS THINK
The biggest challenge in exporting products to China is their high productivity, said Faruque Hassan, president of the Bangladesh Garments Manufacturers and Exporters Association or BGMEA.
“To export our products to a country like China we must enhance our capacity and we are doing so every day. Besides this, China is slowly moving away from the readymade garment sector. This gave us a lot of hope.”
Faruque said they have a plan to connect the local garment factories to some Chinese fashion brands in the future.
China has the ability to bargain prices, which becomes a big challenge for Bangladeshi companies seeking to export goods, said Selim Reza, owner of Wahab and Sons, which exports jute and jute products to China. China has significant scope for bargaining as they have substantial connectivity with all other countries around the world, he said.
“It’s really hard to export there as we can’t make enough profit. Language is also a barrier to doing business with China and, in addition to this, many of their traders don’t pay us regularly.”
But not all businessmen share Selim Reza’s view. Most Chinese traders do business fairly, they said.
ATTENTION REQUIRED
Bangladesh produces a very limited number of products that can be exported to China, said Mohammad Mansur Uddin, the commercial counsellor of Bangladesh in Beijing. Also, Bangladeshi businessmen are not utilising the opportunities they do have available, he said.
“China is hosting four international trade fairs this year but the presence of Bangladeshi companies is very low. In Shanghai, authorities will provide a free pavilion to some countries, but we’re unsure if Bangladeshi companies will be there.”
Bangladeshi companies must appoint a representative to China and open a branch office, even if it is small, he said.
“But Bangladesh companies are not paying proper attention. They can benefit by appointing Bangladeshi nationals, who reside in China for education or other purposes and know the local language, as part-time commercial agents.”
For Bangladesh, the readymade garment sector is the backbone of its export economy and the exporters are focused on Europe and the US as their main markets, which has led to them disregarding China’s potential as a market, said Additional Commerce Secretary Hafizur Rahman.
China also has a great demand for a number of products that Bangladesh does not have a capacity to produce, said Sohel N Wahid, an exporter. “This means we can export whatever quantity we produce. Therefore, we need to focus on increasing production,” he said.
There is no obstacle to exporting goods to China if Bangladesh increases production, said Wahid, who exported 400 tonnes of oil to China last year.
READYMADE GARMENTS RAISE HOPES
Bangladesh made significant progress in exports to China in the 2016-2017 fiscal with almost $1 billion in goods sent to the country. The imports from China was $10 billion in that period, pushing the trade deficit ratio to 1:10.
Bangladesh-China trade neared a record $15 billion in the 2018-2019 fiscal year. Bangladesh exported goods worth $831 million during that period.
Bilateral trade dropped to $12 billion in the next fiscal year as the coronavirus pandemic broke out. Bangladesh exported goods worth $600 million to China that year.
Every year Bangladesh exports 98 types of goods to China, with readymade garments making up 60 percent, according to the EPB.
The other products range from jute and jute thread, textile thread, fish, crab, Asian swamp eel, rawhide and leather goods, vegetables, tea, coffee, oil seeds, and animal fat.
But only 0.05 percent of the readymade garments imported by China comes from Bangladesh, said researcher Razzak.
Before the COVID-19 pandemic broke out, Bangladesh’s export growth to China remained around 7 percent, which is lower than those of its competitors Myanmar or Cambodia.
Currently, the readymade garments market in China is worth $322 billion and it is expanding rapidly. Soon it is likely to surpass the annual US market, which is worth $370 billion.
Bangladesh contributes 7 percent of knit garments and 8 percent of woven garments to China. Cambodia, India, Indonesia, Myanmar, Pakistan and Vietnam are strong competitors for Bangladesh in this sector.
Before the pandemic, Bangladesh made an average of 15 percent annual growth in exports to China in five years. During that period, the global export growth of Bangladesh stood at 7.4 percent. Cambodia, Indonesia and Vietnam had a faster growth rate.
“Besides cotton products, Bangladesh has focused on manmade fibre products in recent times. It will help us capture the Chinese market if we can enhance the capacity in this sector,” said BGMEA President Faruque.
They are also trying to export comparatively cheaper products, he said.
“China has a demand for high-priced garments which is not possible for us to produce at the moment. Those are being made in different European countries and reaching China. For example, Armani products. The affluent class in China wear clothes made in France, Italy and the US.”
DOES THE NEW TAX-FREE MEASURE REALLY HELP?
China has widened the export of duty-free goods but it did not expand the tariff line purview for the goods regularly exported from Bangladesh, said Kumkum Sultana, deputy director of EPB.
Most of the 98 types of products exported last year have been receiving a duty-free facility in China for a long time, she said.
Facilities in the export of fisheries and medicine, however, had some added advantages, she said.
“For fisheries, the duty-free option has increased tariff lines from 327 to 338. It is the same for medicines which increased from 88 tariff lines to 138.”
TARIFF LINE
The tariff line for plastic goods, a prominent item exported to China, remains the same at 166 after the new tariff announcement in 2020.
No new addition was made to the 131 tariff line of knitwear, the 166 tariff line of woven garments and the 102 tariff line of home textiles.
At least four new products have been added to the 38 tariff line of leather shoes and footwear.
China kept the duty-free option for 37 tariff lines of ceramic wear, 525 of electronic goods, 11 lines of motorcycle, 62 lines of furniture unchanged.
The duty-free advantage in China’s tariff line has been increased to 97 percent from 61 percent in July last year, which is of course encouraging, said EPB Vice Chairman AHM Ahsan.
CRAB EXPORT RESUMES
Bangladesh earned $73.9 million by exporting live fish, crab and Asian swamp eel in the 2018-2019 fiscal year. The export of crab and eel, however, was halted for nine months in 2020-2021 due to the COVID-19 pandemic and flaws in the certification system.
Exports resumed on Jun 2, after the authorities fulfilled some conditions placed by China, including quality control and prevention of forgery of certificates, said Niaz Uddin, deputy director of the Department of Fisheries.
The products will be tested in the newly established laboratories prior to their export to China, which will ensure no complication arises, he said.
