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Dhaka’s willingness to expand bilateral relations with Beijing suggests that post-Sheikh Hasina Bangladesh may be experiencing the consequences of decisions made by its predecessor
The interim administration in Bangladesh, headed by chief advisor Muhammad Yunus, has been functioning since the ousting of Sheikh Hasina. (AP Photo, File)
The interim administration in Bangladesh, headed by chief advisor Muhammad Yunus, has been functioning since the ousting of Sheikh Hasina, who held power for 15 years, following a significant student-led uprising. Historically, China has maintained a strong trading relationship with Bangladesh, which grew notably during Hasina’s governance. Her tenure marked the beginning of China’s deepening interest in Bangladesh, culminating in a pivotal moment during President Xi Jinping’s visit to Dhaka in 2016. That year also saw Bangladesh’s entry into China’s Belt and Road Initiative, establishing Beijing as Dhaka’s primary trading partner and investor, while Dhaka was designated as Beijing’s “all-weather friend”.
However, there are concerns that China’s excessive investments have contributed to Bangladesh’s economic vulnerabilities, challenges that the interim government has inherited since August of the previous year.
The political instability following Hasina’s removal raises questions about whether the new interim government will adopt a foreign policy distinct from that of its predecessor. An examination of its neighbourhood policy suggests some shifts; nevertheless, regarding relations with Beijing, Dhaka’s foreign policy appears largely consistent with Hasina’s approach. This situation provokes inquiry into whether the interim government will continue to benefit from the groundwork laid by Sheikh Hasina.
A brief overview of Chinese involvement during Sheikh Hasina’s second term reveals a remarkable increase in investment, rising from $241 million in 2016 to $1.4 billion by 2023 across various sectors, including manufacturing, energy, and information technology.
Additionally, China has emerged as the leading investor in Bangladesh’s exclusive economic zones. The bilateral trade relationship has also seen substantial growth, surpassing $25 billion in 2022; however, a significant trade deficit persists as Bangladesh’s exports to China remain below one billion dollars, despite China offering duty-free benefits to Bangladesh. Over this period, Dhaka has received more than $2.6 billion in foreign direct investment (FDI) from China, making it the largest source of FDI in the country.
Furthermore, for the past four financial years, China has been the predominant lender to Dhaka, providing around $2.97 billion, which constitutes 40 per cent of Bangladesh’s total lending. Chinese loans account for 10 per cent of the country’s annual borrowing needs.
The significant financial support from Beijing for Dhaka’s ambitious infrastructure projects during Sheikh Hasina’s administration has profoundly influenced the nation’s economy, raising alarms about the potential for a Chinese debt trap. Last year, Bangladesh’s external debt surpassed $100 billion for the first time, with its debt to China reaching $6 billion, accounting for nine per cent of the total external debt and 24 per cent of its bilateral external debt.
The rapid increase in Dhaka’s borrowing from China is primarily attributed to extensive funding for development initiatives. However, delays in loan approvals and disbursements have led to cost escalations in key projects, such as the Dhaka-Ashulia Expressway.
Additionally, Bangladesh faces growing environmental, social, and governance (ESG) risks associated with approximately 59 per cent of Chinese-backed projects, which have adversely affected the performance of these initiatives. Similar concerns extend to defence trade with China; Dhaka is the second-largest recipient of Chinese arms exports, sourcing about 72 per cent of its military equipment from Beijing.
Furthermore, 86 per cent of Dhaka’s imported military hardware originates from China. Nonetheless, reports indicate that issues regarding the quality of Chinese arms exports have emerged in Bangladesh, combined with Beijing’s lack of transparency and accountability in contractual agreements, resulting in additional financial burdens on Dhaka and impacting the overall effectiveness of its defence forces.
A few months prior to Hasina’s removal, the relationship between China and Bangladesh reached significant new levels, although some tensions arose from Hasina’s efforts to maintain a balanced foreign policy between India and China.
During Hasina’s visit to Beijing in July of the previous year, just weeks before her ousting, China consented to enhance its ties with Bangladesh to a ‘Comprehensive Strategic Cooperative Partnership’. However, Dhaka’s appeal for a $5 billion soft loan went unanswered by Beijing, which served as a clear sign of dissatisfaction with Hasina’s preference for New Delhi regarding the management of the Teesta River project.
China has adopted a cautious stance in light of the political transition in Dhaka, reaffirming its longstanding principle of ‘non-interference’ in the internal matters of Bangladesh. Nevertheless, Beijing perceives this governmental shift as an opportune moment to gain favour with Dhaka on agreements where the Hasina administration had shown a preference for India.
China’s ‘non-interference’ policy aims to foster amicable relations with various political factions in Dhaka, many of which hold anti-India sentiments. The Chinese Communist Party has already extended invitations to delegations from the Bangladesh Nationalist Party (BNP) and several Islamic parties, including Jamaat-e-Islami, to visit China.
To mitigate any further disruptions to its infrastructure projects in Bangladesh, which have been stalled due to the country’s political unrest, Beijing has communicated its commitment to maintain and enhance its partnership with whichever party comes to power in Bangladesh. Recently, a Chinese delegation met with officials from the Bangladesh Investment Development Authority (BIDA) and the Bangladesh Economic Zones Authority (BEZA), expressing interest in investing in Dhaka’s renewable energy sector.
This month, Bangladesh’s Foreign Advisor Md. Touhid Hossain made his first official overseas trip to Beijing to participate in a bilateral meeting with his Chinese counterpart. During this meeting, he advocated for reducing the interest rate on loans from the current 2-3 per cent to one per cent and requested the waiver of commitment fees.
Additionally, he sought an extension of the loan repayment period for both preferential buyer’s credit and government concessional loans from 20 years to 30 years, a request that Beijing has provisionally accepted. Dhaka also proposed that China invest in electric vehicles (EVs) and establish an EV manufacturing plant in Bangladesh, expressing interest in further investments in the energy sector.
Hossain articulated the post-Hasina perception of China within Bangladesh, highlighting a broad consensus across political parties and support from successive governments and the populace towards Beijing.
Beijing has strategic interests in Bangladesh that encompass both defence and economic aspects. China is eager to revive its stalled Belt and Road Initiative (BRI) projects in Bangladesh, which were established during Hasina’s administration. Beijing aims to create new avenues for engagement under the BRI to supplant New Delhi’s influence, exemplified by its ongoing interest in the Teesta project and its announcement to establish friendship hospitals in China for Bangladeshi patients.
Consequently, a stable political environment and a ‘pro-China’ leadership are essential for Beijing to reinforce its strategic interests. China’s outreach at the political party level, including with the interim government, indicates its efforts to position itself as a preferred partner in Bangladesh’s foreign policy.
However, Dhaka’s willingness to expand bilateral relations with China, despite the economic challenges that such over-engagement has already introduced, suggests that post-Hasina Bangladesh may be experiencing the consequences of decisions made by its predecessor.
The writer is an author and columnist and has written several books. His X handle is @ArunAnandLive. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
