What impact will Yunus' visit to China have on Bangladesh?

Diplomatic activities between Bangladesh and China have notably increased after the formation of an interim government under the leadership of Professor Muhammad Yunus following the student-people's uprising. Following the fall of the Hasina government, China quickly expressed support for the newly formed Yunus government and pledged to strengthen diplomatic and economic cooperation.

On 12 October last year, after Professor Yunus assumed power, two Chinese warships visited Bangladesh on a goodwill tour, which had a significant impact on the military and diplomatic relations between the two countries. Additionally, after the downfall of the Hasina government, Chinese authorities began regular meetings with almost all of Bangladesh’s active political parties and invited their representatives to China, signaling a new horizon in bilateral diplomacy. The most significant part of this ongoing diplomatic progress is expected to be the Chief Advisor’s visit to China.

The Chief Advisor’s visit to China is particularly significant as it occurs during a period when a large portion of the population is dissatisfied with India. The excessive closeness between the now-defunct authoritarian Awami League and India, indiscriminate killings of innocent Bangladeshis at the border, and the failure to receive a fair share of water resources have led to increasing public resentment towards India. As a result, diplomatic relations between Bangladesh and India are at a low point. In such a context, the Chief Advisor’s visit to China could have a significant impact on Bangladesh’s economy, and in the long run, also play a crucial role in regional and global geopolitics.

Under the BRI, China has promised a $40 billion package to Bangladesh, with $26 billion allocated for various infrastructure projects and $14 billion for joint investment projects. However, so far, China has approved a loan of $4.45 billion for 35 projects.

Analysts believe that if $10 billion worth of investments under the BRI are implemented, Bangladesh’s GDP could increase by nearly 4 per cent. Thus, the BRI is likely to be a focal point of discussions during the visit.

Although the Chief Advisor might propose a few new projects under this initiative, the main goal will be to ensure the rapid implementation and handover of existing projects. Many of these projects have already faced delays, leading to cost overruns and setbacks in development.

In addition to the BRI, China has three other initiatives— the Global Development Initiative, the Global Security Initiative, and the Global Civilization Initiative. While Bangladesh may join the Global Development Initiative during this visit, there has been little interest in the other two initiatives from Dhaka. This is because Western powers have expressed concerns about deepening relations with China, and Bangladesh is no exception.

Before the Chief Advisor’s visit, China had agreed in principle to extend the repayment period for Bangladesh’s loans. This decision was communicated during a bilateral meeting between Bangladesh's Foreign Affairs Advisor, Md Touhid Hossain, and China's Foreign Minister Wang Yi in Beijing.

During the discussion, Touhid Hossain requested that the interest rate be reduced from 2-3 per cent to 1 per cent, that commitment fees be waived, and that the repayment period for preferential buyer loans and government loans be extended from 20 to 30 years. Wang Yi praised Bangladesh's strong record of repaying loans and agreed in principle to extend the repayment period. However, he only assured consideration of the interest rate reduction. Furthermore, China announced that Bangladesh would retain duty-free and quota-free access to the Chinese market for three years after leaving the least-developed country (LDC) list.

While the extension of loan repayment terms is a positive decision for Bangladesh, it seems unlikely that China will reduce the interest rate from 2-3 per cent to 1 per cent. Sri Lanka had also received loans at the same interest rate at the same time. Reducing the interest rate for Bangladesh could set a precedent for other countries, which could pose challenges for China's economic policies. Therefore, while Bangladesh might get some concessions, there is little likelihood of a significant reduction in interest rates. However, Professor Yunus is likely to bring up the issue during discussions, with a focus on Bangladesh’s economic development and financial stability.

A free trade agreement (FTA) is also likely to be an important agenda item during the visit. However, significant decisions regarding the FTA are unlikely at this stage. Although the feasibility of an FTA has been assessed, and discussions are expected to begin soon, it has not yet reached the stage of formal negotiations. Therefore, tangible progress on this issue is not expected during the visit. Instead, the focus will likely be on promises to strengthen trade relations and expressions of friendship in diplomatic terms. In practice, however, there may not be any visible progress on the FTA at this time.

One of the important areas of discussion during the visit will be health sector cooperation. China has proposed that four hospitals in Kunming city be specifically allocated for the treatment of Bangladeshi patients. Additionally, China has plans to build a modern, high-quality hospital in Dhaka, which will further strengthen health sector cooperation between the two countries.

This health sector initiative is not only aimed at improving medical facilities but also serves as a significant geopolitical step. Currently, the India-Bangladesh relationship is somewhat tense. Thus, this initiative will not only enhance Bangladesh's healthcare but also strengthen its diplomatic position, demonstrating that Bangladesh is capable of building partnerships with multiple countries independently, rather than relying on any single nation.

Issues related to the Teesta and Brahmaputra rivers are likely to be critical discussion points during the visit. Bangladesh views the Teesta project positively, but its implementation could create new tensions in the region, especially with India, which is also reliant on Teesta water. At the same time, China is constructing dams on the Brahmaputra River, which has raised concerns among Bangladesh’s policymakers and environmental experts. However, China has assured that these dams will not have any harmful impact on downstream water flow.

Bangladesh has long suffered from the lack of a fair share of water distribution, whether with India over Teesta or potentially with China over the Brahmaputra. Therefore, this issue is both politically and economically significant. Professor Yunus will likely raise this matter with Chinese leaders. However, diplomatic experts suggest that China may avoid deep discussions on this and focus more on less controversial issues. As a result, Bangladesh will need to carefully devise a strategy to secure its water rights while maintaining a balanced relationship with both China and India.

Both China and Bangladesh view the repatriation of the Rohingya refugees as a long-term solution, but little progress has been made on this crisis. However, one positive aspect of the visit could be discussions on securing new funds for the Rohingyas. If new assistance or commitments are secured, it could provide a glimmer of hope amid the ongoing crisis in Bangladesh. However, Bangladesh must remain cautious and ensure that such discussions lead to effective initiatives, as taking action before the situation deepens is critical.

Another important outcome of the visit could be the establishment of a practical dialogue mechanism with various stakeholders in the Rakhine State, including the Arakan Army. Given the current situation, it is crucial to engage with these groups to create an environment conducive to the safe return of the Rohingyas. Bangladesh needs strong international support to address this crisis, and China could play a significant role in providing that support.

The discussions are also likely to focus on enhancing trade and investment, particularly in areas such as agriculture, energy, transportation, water management, and industrial development. China may discuss the import of advanced agricultural machinery and seed production technology for Bangladesh, aimed at modernising the agriculture and poultry sectors and increasing productivity.

Alongside agreements and commitments with China, it is also essential to consider the global geopolitical context during the Chief Advisor’s visit. Bangladesh needs to clarify to the United States and Western countries that there is no cause for concern regarding Chinese investments in Bangladesh’s infrastructure; in fact, these development projects could be beneficial for Western countries as well, as weak infrastructure is a primary barrier to foreign investment. Without improved infrastructure, it is impossible to create a sustainable investment environment.

Bangladesh can maintain strategic balance by securing loans from China while also creating opportunities for foreign direct investment (FDI) from the United States and Western countries. However, Bangladesh’s most effective strategy would be to avoid taking sides in the China-US rivalry and instead work as a bridge for dialogue and understanding between the two.

Bangladesh could also play a role as a neutral ground for resolving East-West disputes, with Dhaka emerging as a key centre for international peace dialogues. To succeed in this role, however, Bangladesh will need strong leadership and effective strategies to ensure national interests are protected while maintaining diplomatic balance.

*SK Tawfique Haque, professor and Director of South Asian Institute of Policy and Governance (SIPG) at North South University

*Syeda Lasna Kabir, Professor, Department of Public Administration, University of Dhaka

*Mohammad Esa Ibn Belal, Research Associate, South Asian Institute of Policy and Governance (SIPG), North South University.

*This article, originally published in Prothom Alo online edition, has been rewritten in English by Rabiul Islam