Bangladesh News Bangladesh - China Relation

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Bangladesh has climbed a whopping 40 notches up in a decade in the Economist Intelligence Unit's (EIU) China Going Global Investment Index 2023, standing as the 12th most attractive destination for Chinese investors after India (11th).

Released on 7 September, the 2023 edition of the index ranked 80 investment destinations based on their appeal to Chinese investors, using around 200 indicators.

Bangladesh was in 52nd position in the 2013 edition of the index.

The Chinese president, Xi Jinping, launched the Belt and Road Initiative (BRI) in 2013, and in the decade since, Chinese companies have become formidable global investors. The EIU forecasted that China will regain its position as the second-largest source of overseas direct investment (ODI) by 2024.

Singapore topped the 2023 ranking as the most attractive destination for Chinese investors.

"Its appeal lies in its status as an established global business hub, its cultural ties to China and its neutrality in the tensions between China and the West", read the report.

Indonesia came 2nd as the attractiveness of the country stems from its nickel reserves, abundant cheap labour and vast market size.

It is followed by Malaysia (3rd), Hong Kong (4th), Thailand (5th), Vietnam (6th), Switzerland (7th), the United Arab Emirates (8th), Saudi Arabia (9th), and Chile (10th).

The report highlighted, "South-east and South Asia have climbed steadily in the ranking since 2013, reflecting the regions' robust growth outlook, growing middle class, abundant strategic natural resources and relative openness towards Chinese investors."

The EIU has pinpointed four motivations for which Chinese companies "go global": market expansion, supply-chain development, natural resources and technology and innovation.

The risk considerations include a country's bilateral relations with China and the operational and financial risks to general foreign investors.

Within these categories of opportunity and risk, they have selected a series of around 200 forward-looking quantitative indicators to generate the overall China Going Global Investment Index.

Market expansion opportunities are more prevalent in South-east and South Asia.

Bangladesh ranked as the second most attractive destination for market expansion investment, after Indonesia.

The EIU forecasted that Indonesia and Bangladesh will be among the top 20 global economies by 2040, based on market size, economic growth and the potential of the aforementioned sectors.

Bangladesh stood as the 8th most attractive destination for supply-chain development investment, the sub-ranking assessed the competitiveness of different investment destinations as key supply-chain nodes of Chinese manufacturers.

Recognising different levels of risk tolerance and management capacity among investors, the EIU has supplemented the ranking with an opportunity/risk matrix—a tool designed to categorise markets into various groups.

Bangladesh is among destinations with more opportunities and less risk.

 

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Chinese factory M/s QSL.S Garments Co, is going to set up a RMG industry in Mongla EPZ (MEPZ) with an investment of $ 19.5 million.

In presence of the Executive Chairman Major General Abul Kalam Mohammad Ziaur Rahman, Bangladesh Export Processing Zones Authority (BEPZA) and M/s QSL.S Garments Co, signed an agreement to this effect at BEPZA Complex, Dhaka today (10 September).

Nafisa Banu, Member (Finance) of BEPZA and Mr. Wanle Xuan, Managing Director of QSL.S Garments Co., Ltd. signed the agreement on behalf of their respective organizations. This fully foreign owned company will produce annually 6 million pcs of woven & knit garments products like Shirt, T-Shirt, Jacket, Pant, Shorts, etc. They will create employment opportunities for 2598 Bangladeshi nationals.

Among others, Executive Director (Public Relations) Nazma Binte Alamgir, Executive Director (Investment Promotion) Md. Tanvir Hossain and Executive Director (Enterprise Services) Md. Khorshid Alam witnessed the signing ceremony.

 

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Chinese company Cherry Button Limited will invest $12.2 million to establish a garment accessories manufacturing factory at the Adamjee Export Processing Zone in Narayanganj.

To this end, the Bangladesh Export Processing Zones Authority (Bepza) and Cherry Button signed an agreement at the Bepza Complex in Dhaka yesterday, according to a press release.

The company will produce 1,650 million pieces of metal buttons, plastic buttons, metal zippers, vislon zippers, nylon coil zippers, and other accessories like eyelets, rivets, stoppers, badges, buckles, and suspender buckles annually.

The investment will create jobs for 1,068 Bangladeshi nationals.

Ali Reza Mazid, investment promotion member of Bepza, and MA Miaoyan (Jasika), chairman of Cherry Button, signed the agreement, the press release added.

 

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Chinese company M/s Bangladesh Boyang Textile Co Ltd is going to establish a textile and home textile manufacturing venture within the Uttara Export Processing Zone (EPZ), with an investment of $23.15 million.

To this effect, Bangladesh Export Processing Zones Authority (Bepza) signed an agreement with the company at Bepza Complex in Dhaka on Sunday, in the presence of Bepza Executive Chairman Major General Abul Kalam Mohammad Ziaur Rahman, said a press release.

The company is expected to generate employment opportunities for approximately 1,993 Bangladeshi nationals.

Bangladesh Boyang Textile Co has a target to produce an impressive 50 million metres of Linen/Cotton Woven and denim Fabrics annually, alongside 3 million pieces of home textiles such as pillowcases, bed sheets, and tablecloths.

Ali Reza Mazid, member (Investment Promotion) of Bepza, and Peng Liu, chairman of Bangladesh Boyang Textile Co Ltd, signed the agreement on behalf of their respective organisations.

 

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A Chinese firm has been contracted to build a solar power plant in Bangladesh.

A total of three solar power plants were approved by the Bangladesh cabinet on Wednesday (27 September).

A joint venture of Fujian Yongfu Power Engineering Co Ltd of China, Air Waves Pvt Limited and Moni Traders Limited will set up 70-MW solar power plant in Bandarban from which the BPDB will buy per unit of power at $9.99 (equivalent to Tk10.96) for a period of 20 years.

With the three approvals, the government awarded contracts to establish solar power plants of more than 1000MW in the past six months.

 

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The Bangladesh Bank has given its consent to proceed with Chinese loan offers in its own currency, the yuan, as a cost-saving alternative to dollar-denominated financing.

The decision follows the finance ministry's request for the central bank's assessment of the pros and cons of Chinese loans in yuan versus the traditional US dollar, according to sources of the finance ministry.

In August this year, the Export-Import (Exim) Bank of China proposed to finance Preferential Buyer's Credit-funded projects in its own currency. The proposal emerged in response to the volatile exchange rate of the US dollar, which had depleted the foreign exchange reserves of many countries.

The Chinese government typically extends two types of loans: Preferential Buyer's Credit (PBC) in US dollars and Government Concessional Loan (GCL) in its own currency. In light of the scarcity and high costs associated with the dollar in the global market, China's Exim Bank recommended that Bangladesh consider taking PBC loans in yuan.

A senior official at the central bank pointed out that the US Federal Reserve has been raising interest rates to combat inflation. He said if Bangladesh takes loans from China in dollars, the interest rate would be nearly 6%.

In contrast, yuan-denominated loans would cost only 2.5%, offering a significant interest rate advantage, he added.

One Chinese Yuan equals USD 0.14 on 25 October 2023 rate. In other words, $1 is equal to 7.30 Chinese Yuan.

Also, the Bangladesh Bank clarified that Chinese loans do not impact the country's foreign exchange reserves as these are typically used to purchase goods from China, and the import payments are made directly by the lending bank to the supplier's bank in China. The central bank official explained that opting to repay in yuan instead of dollars could result in an exchange gain, further enhancing the financial benefits of this decision.

What experts say

MA Razzaque, research director at the Policy Research Institute, told The Business Standard that Bangladesh typically repays loans in US dollars. However, since the interest rate on yuan-denominated Chinese loans is lower, the country could save money by purchasing yuan from its reserves and using it to repay the loans. This would also reduce the depletion of its reserves.

"When importing goods, we should compare prices with those of other countries. If the price from China is lower or equal, then it is beneficial for us," the economist said. "We must use Chinese loans in a way that increases our export earnings. If we spend these loans on infrastructure, the output from those projects may be low, which will put pressure on our loan repayments."

When asked whether borrowing in yuan would have any geopolitical implications, he replied, "If China's loans are used to finance exports, I don't see any geopolitical problems. However, if these loans are used to fund projects that increase China's influence, geopolitical concerns may arise."

MA Razzaque said the central bank has carefully reviewed the overall feasibility of Chinese debt, adding, "If we clearly discuss the terms and conditions with all stakeholders before taking yuan loans from China for future projects, there will be no geopolitical implications."

Finance ministry's views on yuan loans

The finance ministry's review found that, under China's loan rules, Preferential Buyer's Credit loans can be used to purchase 65% of construction materials and 40% of electronics materials from outside China, but the outward import bills must be paid in yuan. This requires Bangladesh to convert US dollars into yuan, which introduces currency conversion risk and could increase the actual cost of the project.

It also noted that Bangladesh's export income from China is $1 billion, while its import expenditure is around $16 billion. This trade is conducted in US dollars, which limits the opportunities for Bangladesh to obtain yuan.

What central bank says in its reply to finance ministry

The Bangladesh Bank wrote to the finance ministry that due to the US Federal Reserve's high policy rate, global interest rates on US dollar loans have increased significantly. The country's foreign exchange market faces several challenges in terms of US dollar demand and supply. Currently, taking loans from China in yuan instead of the dollar would result in lower interest rates, exchange gains, and the need to purchase yuan with dollars. In that case, China's debt could be accepted in yuan.

The Bangladesh Bank has expressed its preference for yuan-denominated loans, citing China's central bank's ongoing policy of reducing interest rates as a part of its expansionary monetary strategy aimed at stimulating GDP growth. As an example, last August, the one-year loan prime rate saw a 10-basis-point reduction to 3.45%. Consequently, the yuan is anticipated to weaken against the US dollar.

When asked if Bangladesh is inclined towards yuan-denominated loans, Mezbaul Haque, spokesperson for the central bank, declined to comment, stating, "I am not informed about this matter."

The central bank said since 2016, the yuan has been included in the International Monetary Fund's Special Drawing Rights (SDR) basket. It also said Bangladesh has paid a total of 3.66 billion yuan from 2018-2023 against the yuan loan received from China. As a result, there will be no problem with repaying debt in yuan in the future.

Chinese loan status in Bangladesh

Bangladesh has received 17 billion yuan (equivalent to $2.5 billion) in yuan loans, of which 3.2 billion yuan has been repaid in principal and interest, according to data from the finance ministry.

Bangladesh currently has 10 projects in the pipeline with Chinese financing. Of these, Bangladesh has already agreed to receive 9.49 billion yuan (equivalent to $1.32 billion) in yuan for six projects. China has now proposed to provide $2.87 billion (equivalent to 20.65 billion yuan) in yuan for the remaining four projects. If Bangladesh accepts these loans in yuan, its total debt in the Chinese currency will amount to 45.84 billion yuan.


The government has approved the setting up of another 100MW solar power plant in the private sector on a "no electricity, no payment" basis.

A Chinese consortium of Cassiopea Fashion Limited, Xizi Clean Energy Equipment Manufacturing Company, and Cassiopea Apparels Limited will set up the power plant at Gouripur in Mymensingh on a "Build, Own and Operate" basis.

The Cabinet Committee on Public Procurement on Wednesday approved the tariff proposal for the setting up of the power plant, said Additional Secretary to the Cabinet Division Syed Mahbub Khan after the meeting, presided over by Finance Minister AHM Mustafa Kamal.

As per the approved tariff, the government will purchase power from the solar plant for the next 20 years at a rate of $0.10/kWh, which is Tk11.05 per kWh at the current exchange rate. In line with the current exchange rate, the total expenditure of the government on purchasing power from the solar plant will be Tk3,580.80 crore over two decades.

It will take 24 months to build the plant, an official of the Power Division told The Business Standard.

However, the government will consider the dollar-taka exchange rate of Sonali Bank on the first day of a month after the billing month in paying the electricity bill. In other words, if the taka depreciates, the price of electricity will also increase.

The government has been attaching importance to the development and expansion of renewable energy to ensure universal electricity service and energy security. Hence, it is encouraging private sector participation in power generation through using solar energy, the largest source of renewable energy.

An official told TBS that the sponsor company will manage the entire project cost, including the necessary land resources, transmission lines for power transmission and construction of substations.

The sponsor company had offered the Power Division a power purchase agreement with the government for a period of 25 years. It had proposed a tariff of $0.14/kWh, which is Tk15.47 per kWh at the current exchange rate.

According to the brief sent by the Power Division to the Cabinet Committee on Public Procurement, a 132KV common switchyard is to be constructed at the proposed solar power plant for power evacuation and from there a 9.5km 132KV double circuit transmission for bay extension at the under-construction Shambhuganj grid substation end. The sponsor company will construct the line and provide the required land.

The Cabinet Committee on Public Procurement approved the tariffs for three solar-based power plants from April to August. Among them, the tariff of 44MW power plant at Trishal of Mymensingh and 400MW power plant at Rampal were fixed at $0.10/kWh and the tariff of 50MW power plant at Dimla of Nilphamari was fixed at $0.0998/kWh.

Power Division officials said there is another proposal to build a 100MW solar-based power plant at Trishal, which will be implemented by a consortium consisting of Total Fren SA Ltd gchQ Anand Energy pte ltd. The cost of construction of Common Switchyard, purchase of required land at Shambhuganj grid substation end and cost of construction of transmission line will be borne by both sponsoring companies proportionately.

Besides, the cabinet committee approved the extension of the term and tariff of Ashuganj 55MW gas-based rental power plant. The government's 2nd phase (5 years) contract with sponsor company Precision Energy Limited expired in April and the company proposed extending the term. The committee approved the renewal of the contract for five years at Tk6.256 per kWh on a "no electricity, no payment" basis. The sponsor company will receive Tk1205 crore as tariff during this extended period.

Meanwhile, the cabinet committee also approved a proposal to import 33.60 lakh MMBTU of LNG from the spot market. Total Energies Gas & Power Limited will provide the LNG at around Tk713 crore at $16.34 per MMBTU.


Chinese company Red Forest Limited is going to set up a wig and carnival costume manufacturing industry in Uttara EPZ with an investment of $2.26 million.

The company signed an agreement with Bangladesh Export Processing Zones Authority (BEPZA) to this effect at BEPZA Complex, Dhaka on Wednesday (1 November), reads a press release.

Member (Engineering) of BEPZA Mohammad Faruque Alam and Director of Red Forest Limited Li Chao, signed the agreement on behalf of their respective organisations.

BEPZA Executive Chairman Major General Abul Kalam Mohammad Ziaur Rahman was also present at the signing ceremony.

Red Forest Limited will annually produce 4.09 million pieces of wigs and carnival costume. Some 379 Bangladeshi nationals will get employment opportunity under this initiative.

Among others, Executive Director (Investment Promotion) Md Tanvir Hossain, Executive Director (Enterprise Services) Md Khorshid Alam and Executive Director (Public Relations) ASM Anwar Parvez were present during the signing ceremony.


Chinese company M/s United Spinning and Dyeing Ltd is going to invest $28.20 million to set up a Dyed Textile Yarn manufacturing industry in Uttara Export Processing Zone (EPZ).

To this end, Bangladesh Export Processing Zones Authority (Bepza) signed an agreement with the company at Bepza Complex, Dhaka on Monday (20 November), reads a press release.

Ali Reza Mazid, member (investment promotion) of Bepza, and Yu Min, managing director of United Spinning and Dyeing Ltd, signed the agreement.

Executive Chairman of Bepza Major General Abul Kalam Mohammad Ziaur Rahman witnessed the signing ceremony.

Yu Min, managing director of United Spinning and Dyeing Ltd, said it is their first project in EPZ and they have a plan to invest more.

He hoped that the company would come into production within the next October.

The Bepza Executive Chairman thanked United Spinning and Dyeing Ltd for choosing Uttara EPZ for investment. Mentioning upcoming Jashore and Patuakhali EPZs, he requested to make a plan to invest there in diversified products.

United Spinning and Dyeing Limited will create employment opportunities for 1,816 Bangladeshis and produce 12,000 tonnes of dyed textile yarn annually.

Member (Engineering) Mohammad Faruque Alam, Executive Director (Administration) A N M Foyzul Haque, Executive Director (Investment Promotion) Md Tanvir Hossain, Executive Director (Enterprise Services) Md Khorshid Alam and Executive Director (Public Relations) ASM Anwar Parvez were also present during the signing ceremony.


Following numerous complications, speculations and uncertainties, the 5G readiness project of the Bangladesh Telecommunications Company Limited (BTCL) has successfully come to fruition.

The state-owned telecom firm awarded the contract to the lowest bidder Huawei that quoted a price Tk137 crore less than the government's approved cost, according to BTCL officials.

On 13 November, the BTCL board of directors approved the proposal to award the project to Huawei and on 19 November the BTCL signed the equipment supply agreement with Huawei at its head office in the capital.

The 5G readiness initiative, aimed at launching 5G in the country, costs Tk1,059 crore, receiving approval from the Executive Committee of the National Economic Council (Ecnec) in February 2022.

The project budget includes an estimated equipment purchase cost of Tk463 crore. The procurement tender invited in August 2022 was opened in December that year.

Chinese Huawei, ZTE and Finnish Nokia along with their respective local partner firms bid at Tk326 crore, Tk415 crore and Tk579 crore respectively.

However, there had been a quarter to disrupt the tender process and the lowest bidder fought them at the government's Central Procurement Technical Unit and also in the Supreme Court before its recent victory.

Huawei Bangladesh's Account Responsible Moinul Hasan said in a statement, "Huawei is committed to work with the government to build a smart Bangladesh. We have been working with the Bangladesh government for 25 years.

"We will provide advanced technologies used globally in the 5G Readiness Project to implement the government's vision of 2041."

He also condemned "the persistent attempts by one party to delay the project, including calls for new tenders to safeguard their interests".

"Huawei secured the job following comprehensive evaluations by entities such as the Technical Evaluation Committee and the Board of Directors of BTCL," he added.

 

yf120

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This is what I have been saying regarding the USA-China balancing act for many years. This could have been BD too. I mean, this has been the case since the 90s, but alas, because of a certain third country, we're now in a critical situation.

 

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State Minister of Commerce Ahsanul Islam has urged the Chinese government to initiate the operations of a Chinese bank in Bangladesh to facilitate the use of yuan for bilateral trade.

"The Chinese currency has been recognised by the government as the official currency since last month to facilitate trade with China for Bangladesh," he mentioned during the Economic Reporters Forum (ERF) and China Bangladesh Chamber of Commerce Industry (BCCCI) Journalism Award ceremony held at the Sonargaon Hotel in the capital on Sunday.

Conducted by ERF General Secretary Abul Kashem, the event featured speeches from Minister Counsellor and Deputy Chief of Mission at the Embassy of China in Bangladesh Hualong Yan, Federation of Bangladesh Chambers of Commerce and Industry President Md Mahbubul Alam, BCCCI President Gazi Golam Murtoza, its Secretary Al Mamun Mridha, and ERF President Refayet Ullah Mirdha."

Mentioning that Bangladesh has the potential to become a global trade hub, Ahsanul said, "The bilateral trade gap with China is substantial – around $22 billion. Increasing China's investment in the country is essential to narrowing this gap. We can potentially reduce this disparity by re-exporting products made through China's investment."

He added that achieving the goal of smart market management requires identifying and addressing the issues in market management.

He said the commerce ministry oversees both imports and exports, implementing business-supportive policies aimed at safeguarding consumer interests. Specific initiatives, particularly concerning Ramadan products, have been introduced. The National Board of Revenue has been urged to consider reducing duties on essential items such as oil, chickpeas, chilies, pulses, and onions.

"The prime minister also supports this stance, and we anticipate that the supply of these products will remain uninterrupted," he mentioned.

The state minister assured, "There is a sufficient stock of food products for the upcoming Ramadan. Proposals have been submitted to the prime minister to reduce import duties on some other products, with the hope that they will positively impact consumers during Ramadan."

He mentioned that the country currently has 18 lakh tonnes of rice in stock, and an additional 13 lakh tonnes of food grains have been imported. The supply of various products is expected to remain normal during the month of fasting.

"We are engaged in coordinating efforts at the production, import, and export levels. Collaborative endeavours with all stakeholders are ongoing," he added.

FBCCI President Mahbubul Alam stated that Bangladesh has grown from a $90 billion economy to a $470 billion one. The country is now on the path toward becoming a trillion-dollar economy.

"The China Chamber has been encouraged to collaborate in order to boost Chinese investment in Bangladesh," he added.

 

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