Chinese interest in sourcing Bangladesh apparels

Bangladesh has substantial trade deficits with each of the world's two most populous countries, China and India. While the deficit with India very often comes to focus mainly because of geographical proximity and for some political and economic reasons, the same with China has been widening in the absence of serious efforts for narrowing it down. However, both the countries have been offering in recent years duty-free access of products from Bangladesh, a least developed country (LDC), to their markets with China being a bit more generous. On July 1, 2010, China offered duty-free facility to 4721 Bangladeshi products, mainly garments items, to its market.

Following the duty-free entry facility, export of Bangladesh products to China has been rising, albeit slowly. In the last fiscal, exports to China stood at $320 million while import from that country was around $6.0 billion. Apparels produced in Bangladesh fetched $102 billion in that year. Now, the marketing of a greater volume of Bangladesh garments items, particularly the basic segment ones, in China is being considered an important way of narrowing the trade gap with that country. And a high-powered business delegation, representing the China National Garment Association (CNGA) at a joint press conference with the leaders of the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) in Dhaka last Sunday confirmed such a possibility.

The leader of the CNGA delegation sounded very optimistic about Bangladesh fetching at least $1.0 billion annually through apparel exports to China, home to 1.3 billion people, within next few years. The BGMEA leaders were also found to be very upbeat about such prospects. The optimism expressed by both the business groups was not without a basis. China, for quite sometime, has been gradually abandoning the production of basic segment of apparels, mainly for reasons of hike in wages of its workers. The production of low-value garments for both home consumption and export has become quite uneconomical for it. And that is the potential area that needs to be tapped at its optimal level by the Bangladesh apparel exporters, particularly to meet the domestic consumption need of China.

It is, however, not clear how the Chinese businesses are interested in sourcing basic segment apparels from Bangladesh. If they want to set up production units here to source the same, there could be a clash of interests. The BGMEA is opposed to the entry of foreign direct investment (FDI) in low-end segment and it, as its leaders say, encourages FDI in the high-end section of garments. But indications are that the Chinese RMG producers are more interested in sourcing quality garments at cheaper costs. Some Chinese firms reportedly have already opened their offices in Dhaka to source quality garments at cheaper rates for consumption in their home country. Now the readiness of the Chinese importers needs to be matched adequately by the government of Bangladesh and local apparel units offering the former the incentives they are looking for. The opportunity that has opened up must not be missed under any circumstances.