Bangladesh’s growing energy demands and China’s interest in expanding its horizon across Asia has made the world’s second largest economy a major investor in the deltaic nation.
According to the Bangladesh Bank, Bangladesh has received about USD 600 million from China in the first half of the current fiscal year, with major investment flowing into power generation and mega infrastructure.
The pace of Chinese investment in Bangladesh is sidelining the country’s previous major development and strategic partners. India used to be its most important, but it has invested only a tenth – only USD 65 million – of what China has during the same period.
The two South Asian neighbours have a strong historic relationship since India supported Bangladesh in its fight for independence against Pakistan in 1971. But in recent years, ties have gradually loosened as Bangladesh has moved closer to China.
As a result, in the fiscal year 2017-18, foreign direct investment from China reached USD 506 million, about one-fifth of total foreign capital flow. There are now about 400 Chinese companies doing business in Bangladesh, including about 200 large companies and 200 other small and medium enterprises.
Bangladesh’s closer economic relationship with China has disappointed India. A particularly painful shift was when the Dhaka Stock Exchange chose to sell a 25% stake to a Chinese consortium of the Shenzhen and Shanghai stock exchanges last year, rather than to India’s national stock exchange, which bid 56% less.