Bangladesh is not being able to cash in on the duty-free market access offered by China as the country’s exports to China is still very low compared to imports.
The country managed to export only $683.4 worth of goods to China in FY 2021-22, which was only 1.31 percent of the country’s total export volume, according to commerce ministry data.
In the previous fiscal year, Bangladesh’s exports to China totalled $680 million or 1.76 percent of its total exports.
In contrast, Bangladesh imported goods worth $19.35 billion from China in FY 2021-22 with nearly 50 percent year-on-year growth.
China is the country’s largest trade partner but the trade balance is heavily tilted towards the world’s second-largest economy. Now, imports from China make up 23.46 percent of the country’s total imports.
China had been providing 97 percent duty-free facility to 8,256 Bangladeshi products, including all garment products since 1 July 2021. Adding more 383 new products including leather items to the list, the facility was expanded to 98 percent later.
The duty-free access to China was widened further to 99 percent of Bangladeshi goods including key export items like apparels, jute and leather products and frozen fish from last month.
The additional offer for 1 percent goods on top of the existing 98 percent came in early August this year during Chinese Foreign Minister Wang Yi’s Dhaka visit.
Early this week, a meeting was held at the ministry of commerce to find ways how to close the widening trade gap with China, official sources said.
Bangladesh Bank officials and Bangladesh-China Chamber of Commerce and Industry leaders were also present there.
They told the meeting that most of the banks are reluctant to open letters of credit (LC) with Chinese currency Yuan although Bangladesh Bank has allowed export-import with Yuan.
At the meeting, the businessmen also raised some problems concerning getting duty-free access and carrying out publicity for Bangladeshi products in China.
On September 15 this year, the central bank issued a circular, allowing the opening of LCs with Chinese currency Yuan.
It also allowed the opening of clearing accounts at Bangladesh Bank in 2018. But most banks are not interested in opening LCs with Yuan.
Officials and businessmen are sceptical about utilizing the advantage properly, as the duty-free facility could not boost Bangladesh’s export to China as anticipated.
They cited Bangladesh’s limited export capacity and lack of product standards for the gloomy export scenario.
“If we can increase our capacity, Bangladesh will not be able to fetch billions of dollars cashing in on the duty-free facility provided by China.” Said ATM Azizul Akil, senior vice president of the Bangladesh-China Chamber of Commerce and Industry.
To capitalize on the zero-tariff treatment, the country needs to diversify export products alongside ensuring standards, Akil pointed out.
There is also a huge potential for exports of freshwater fish and poultry items to China. For that, Bangladesh must strictly maintain product quality, he added.
Bangladesh’s overall exports grew by $13.22 billion or 34.38 percent during the last fiscal year, whereas the export growth in China remained stagnant.