Chinese outward FDI and opportunity for Bangladesh

Dhaka,  Wed,  23 August 2017
Published : 16 Apr 2017, 21:17:49 | Updated : 16 Apr 2017, 21:25:17

Chinese outward FDI and opportunity for Bangladesh

Chinese outward FDI and opportunity for Bangladesh
Mohammad Omar Faruk
At present, Bangladesh needs huge investment in infrastructure to boost the economy and attract foreign investment. Developed countries are seeking new global manufacturing hubs for foreign direct investment (FDI). Recently, some developing countries and big manufacturing hubs are shifting their focus from manufacturing to high-tech industry, like RMG to Super/Nano Technology. Chinese manufacturing firms are diversifying their investment with 'Go Global' Strategy. China has made the biggest outward foreign investment in the USA, Peru, UK, Australia, France, etc. But due to the inception of Belt & Road Initiative (BRI), China is focusing on investing more in Asian, African and European counties along BRI.

Recent development of Bangladesh is attracting Chinese investment in different sectors. China is also counting Bangladesh as a major destination for future investment. Chinese companies may likely play an important role in financing, building and operating infrastructure projects in Bangladesh. So, this is the time for Bangladesh to attract Chinese investment in all-around possible sectors.

China's outward FDI grew by 13.3 per cent in 2015 to a historical high of USD 139.5 billion. Over the past five years, China's average annual economic growth is 7.4 per cent and accumulated outward FDI has exceeded USD 1 trillion. Certainly, China is now the most formidable force in the international investment market.

One of the key challenges facing Bangladesh-China bilateral relationship is the existing high volume of trade gap between the two countries. Since the very beginning of bilateral trade relations, Bangladesh has been suffering from huge trade deficits with China. Despite the gap, both countries have shown clear commitment over the years to build "a positive, cooperative and comprehensive relationship'.

Indeed, Bangladesh's relations with China clearly present a host of opportunities. It may be expected that in the coming years, Bangladesh and China will achieve a truly beneficial and strategic partnership conducive to the establishment of a peaceful and prosperous South Asia.

 For this to occur, Bangladesh needs to ensure that its foreign policy is equipped with a strategic vision as well as economic considerations that realistically gauge the direction of regional and international changes. Better infrastructural development and investment opportunity of Bangladesh can reduce such challenges.

The accelerated economic transformation in China and the enhanced strength of Chinese companies amid the global economic recovery is helping these companies expand their presence overseas. Recently, a new range of new government policies has been providing even stronger support to Chinese companies as the government encourages them to go global. For example, under the newly revised Measures for Foreign Investment Management, the approval-based system has been replaced by simplified administrative procedures for overseas investments. Furthermore, the accelerated implementation of the Belt & Road Initiative strategy and increasing policy reforms will bring a new wave of outbound investment.

The Belt & Road Initiative strategy will encourage China's advanced industries and their overcapacity to move into countries along the routes. China has strong capabilities in the high-speed railway, nuclear power, aviation, telecommunications and other advanced manufacturing fields. The saturated domestic China market is prompting relocation of these leading production capacities. In particular, with the implementation of the BRI strategy, focusing on infrastructure and interconnection, China is expected to accelerate transfer of these leading industries to Asian neighbours, although they are ill-equipped in terms of financing and technology. So, it is understandable that as China transforms its economy, Chinese companies will move up the industry chain and their needs for advanced technologies will drive them to actively pursue investment opportunities in developed markets.

Chinese firms have a long experience history to build road, infrastructure, power and energy development projects around the globe. Therefore, Bangladesh can take experienced companies to make their dream projects come true. Success in some major infrastructural investment by Chinese firms in different developing and developed countries indicates that the decision of Bangladesh to firmly tie up with China for infrastructural development will likely be rewarding. Bangladesh government wants long term investment plans from China to invest in the power sector. As Bangladesh is involved in BRI, more Chinese investments in this sector are likely.

The writer is a MS student at the University of International Business and Economics, Beijing, China.

Editor : A.H.M Moazzem Hossain
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