China’s Belt and Road Initiative is an ambitious and multi-faceted strategy aimed at boosting the flow of trade, capital and services between China and more than 60 other countries, including Bangladesh. The vision is to create or improve the infrastructure, capital-raising and trade alliance conditions that will facilitate greater trade and investment.
In Bangladesh, infrastructure is a key priority for the government which can create significant opportunity in the private sector. The government plans to invest USD40 billion in infrastructure development including Power, Railway, Bridges, Roads, Port, Terminals and Telecom projects in the next 5 years. During the Chinese President’s visit to Bangladesh, 27 agreements were signed, with a value expected to exceed USD25 billion. This will allow to generate business opportunities in private sectors such as transportation and logistics, construction and energy, whilst also improving the financial framework for cross-border trade by oiling the wheels of capital investment and infrastructure financing.
“There’s a significant scope for private sector involvement to help fill the current funding gaps and HSBC is perfectly suited to support clients participate in these opportunities,” said Francois de Maricourt, Chief Executive Officer, HSBC Bangladesh.
From HSBC’s perspective BRI is our natural space. We have a unique competitive advantage because of our international network
Trade is the key link between the two countries - China is Bangladesh’s largest trading partner, and Bangladesh is China’s third largest trading partner in South Asia.
In 2015 and 2016, bilateral trade exceeded USD10 billion, with imports from China making up the bulk of that at over USD9.5 billion. To minimise this trade gap, the Bangladesh government has allocated special economic zones for Chinese investors, which is expected to further increase Chinese investment in the country.
Together, Bangladesh’s trade with China is now about 26.5 percent of its total trade with the world. If this rate prevails, the total bilateral trade would be USD18 billion in 2021. There is significant opportunity to grow business with Chinese enterprises in the next 2 to 3 years.
In Bangladesh, HSBC leads the local market in global connectivity and innovative trade solutions. It is the first Bank, to facilitate trade settlement in Renminbi (RMB). It is the only international bank with a presence in all of eight Export Processing Zones (EPZ’s) enabling international trade. Based on this potential Chinese business growth in Bangladesh, a China Desk is in place which further facilitates the relationship with the Chinese customers.
BRI builds on the ancient Silk Road, formally established during the Han Dynasty of China, creating trade links across both land and sea, along which silk, spices and other goods were exchanged across the world.
This initiative was first introduced by Chinese President Xi Jinping in 2013. The vision is to create and improve the physical (infrastructure), financial (lending, capital-raising) and policy (e.g. customs, trade alliances) conditions that will facilitate greater trade and investment.
BRI consists of the Silk Road Economic Belt (the ‘Belt’) and the 21st Century Maritime Silk Road (the ‘Road’). The ‘Belt’ is a land-based route leading from China through Central Asia to Europe, and the ‘Road’ is sea-based, passing through Southeast Asia, Africa, Middle East and reaching Europe. New and improved trade routes and infrastructure will make it quicker and easier for businesses to trade globally, with access to new markets and helping to streamline existing supply chains.
The initiative was originally seen as improving connectivity with existing markets as well as accessing new markets to deploy excess capacities of Chinese companies in areas including steel and construction, and to stimulate external demand for Chinese goods and services. It is becoming increasingly evident that the benefits are not limited to China alone; it will have a huge impact on the global economy and local businesses on and off the Belt and Road.