China has the largest population and second-largest economy in the world, growing at a high rate of 6%-10% for almost 30 years. With almost one fifth of the of the world population, one of the largest economies and a growing consumption power, China has been a lucrative destination of all consumer goods and services. Since becoming a member of World Trade Organization (WTO) in 2001, China has been providing Duty Free, Quota Free (DFQF) facility to least developed countries from 2010. Initially it provided DFQF on 60% of all the products that the country imports. At 8-digit level, the number of products was 4,762. Three years later the country further extended the DFQF to 95% of all the products. This time the number of products was 7,381. After two years, in 2015, it further increased the number of products. This to 8,036 products out of 8,285 to get DFQF entry which accounts for 97% of the total tariff lines of the country. China adopted the initiative to boost import from LDC’s. Bangladesh recently enabled China’s DFQF for 97% tariff lines (8,036 products at 8-digit level) which means, out of 8,285 products that China imports, up to 8,036 products will enjoy DFQF entry to China if Bangladesh exports that product. This facility will be available until 2024.
In this article, we will demonstrate the existing state of Bangladesh’s export to China and the future possibilities.
Table 1: The Number of unique products exported (HS 8-digit) from Bangladesh and earnings (China compared to the world)
The data for FY 2011-12 to FY 2019-20 shows that in the last fiscal year, Bangladesh exported 1,773 unique products (at HS 8-digit) to the world. Among them only 489 products were exported to China which is 27.58% of the exportable product produced in the country. This means more than 72% of our exportable products are not being exported to China as of FY 2019-20. If we compare Bangladesh’s export earnings from China to the whole world, the rate was somewhat in between 2.5% - 3.5%. The total earning from China also had been in the one billion mark but the Covid19 pandemic pushed it to down to 740 million which is lower than the FY 2012-13 earnings. The total export earnings from China in FY 2019-20 declined almost 28% compared to FY 2018-19.
Bangladesh has been enjoying duty free quota free entry to China or 4,788 tariff lines at the 8-digit level. If we look at the data, Bangladesh could only take benefit of 10% of the DFQF tariff line under China’s DFQF issued in December 2011. If we consider the newest DFQF tariff line of 8,036 products the rate comes down to 6%.
According to World Integrated Trade Solution data, China has been importing more than 4,400 products at HS code 6-digit label. In the FY 2017-18, China imported 4,429 products from the world. In the same fiscal year at 6-digit level Bangladesh exported 475 products to the country which is not more than 11%.
Under these 4,429-products China imported more than 2.1 trillion-dollar worth of goods from the world in FY 2017-28. On the other hand, Bangladesh exported little more than one-billion-dollar worth of goods to China in the same fiscal year meaning Bangladesh could grab only 0.05% of the of the total import expenditure of China. Meanwhile, China sources from 215 partners other than Bangladesh.
Bangladesh started to enjoy China’s Duty-Free Quota-Free protocol for 8,036 products (At HS 8-digit) from July 2020. We believe this is a great opportunity for Bangladesh to expand export horizons but we have been heavily dependent on textile products which accounts for more than 500 products (at HS code 8-digit level). More so, China itself is the largest textile producer in the world. In order to reap the full benefits from the recent DFQF Bangladesh needs to focus on other sectors as well.
Currently Bangladesh is producing almost 2,000 exportable products (at HS code 8-digit level), only a fourth of the total zero tariff line of China. To increase the number of product and increase our export earning from China, youth has a vital role to play. Bangladeshi youth have been running numerous numbers of manufacturing CMS businesses around the country and on social media. They can be trained to produce exportable products, targeting the gaps of the importing nations. Training, support and easy access to money can increase the number of exportable products several folds. This will have a positive impact on our export around the world, including China.
We also believe digital B2B platforms have a pivotal role to play in this. Detailed digital database of all manufacturers of Bangladesh should be designed with highest priority. Such kind of database will enable digital B2B trade platforms to grow which will enable business of any level to access the global market as made evident by Alibaba’s stellar success.