In Depth: After Trump Tariff Hit, Bangladesh Has Needs China Can Meet

By Guan Cong and Kelly Wang

At the Bangladesh Investment Summit held in its capital Dhaka in early April, the country’s interim government leader described the South Asian nation as a country where wild but world-changing ideas can materialize, seeking to restore foreign investor confidence following last year’s political upheaval.

“Bangladesh’s ground [for business] is very fertile. Put a little bit of seed, it becomes global,” said Muhammad Yunus, an economist and Nobel Peace Prize laureate, who was appointed chief advisor to the interim government in August 2024.

The summit marked the government’s latest effort to attract foreign capital, presenting fresh opportunities in which Chinese businesses could play a part. While Bangladesh boasts a large, youthful labor force and is the world’s second-largest apparel exporter after China, the nation faces challenges of limited resources and frequent natural disasters.

For Chinese businesses, Bangladesh has long been a strategic market for overseas construction projects and textile manufacturing. More recently, areas such as renewable energy, port modernization and river management have emerged as potential collaboration areas, according to industry insiders.

In addition, as U.S. tariffs continue to reshape global supply chains, Bangladesh has reportedly seen growing Chinese investment in the country. While local businesses are eager to see more Chinese factories established in Bangladesh, Chinese firms voiced hopes for swift political stabilization and streamlined project approval processes to take cooperation to the next level.

What Bangladesh needs

After enormous student protests erupted in Bangladesh in June 2024 to oppose the government’s reinstatement of a controversial civil servant quota system, the country’s then Prime Minister Sheikh Hasina, who had ruled for 15 years, stepped down and left the country that August.

Yunus, best known for founding a bank that provides microloans to the poor, now leads the interim administration through a period of uncertainty. The 85-year-old is tasked to restore social order as well as investor confidence, which has been damaged by internet outages, commercial system breakdowns and strikes.

After the uprising, foreign direct investment into Bangladesh from July to September of the 2024-2025 fiscal year fell to the lowest in nearly six years, according to data from Bangladesh’s central bank.

Since taking the chief advisor role, Yunus has emphasized “openness” as his economic priority for the country. “We want to focus on opening the doors for everyone so that we can become the workplace for every country and produce things for every country,” he said in an interview with Caixin in February.

For China and Bangladesh, which established official diplomatic relations 50 years ago, the two sides have already cooperated on a wide range of infrastructure projects including roads, bridges, power grids and sewer systems. Now, advertisements for Chinese brands like car manufacturer BYD Co. Ltd. and smartphone-makers Vivo Mobile Communications Co. Ltd. and Xiaomi Corp. are seen in the streets of Dhaka.

During a March visit to China, Yunus met with President Xi Jinping. In a joint statement, China encouraged cooperation in businesses beyond textiles and manufacturing such as clean energy and the digital economy. The Bangladeshi side welcomed Chinese companies’ participation in modernizing one of its ports and developing an economic and industrial zone.

With a population of 172 million, Bangladesh has a large demand for power, but its transmission and distribution infrastructure remains weak and coal-fired plants are underutilized due to fuel shortages.

Energy projects are a strategic investment priority for the current government. Bangladesh has a plan to increase the share of renewable power capacity from 2% to 20% by 2030 — offering opportunities for Chinese suppliers of wind turbines and solar components.

Another area is port development. Due to Bangladesh’s shallow coastal waters, most cargo ships must anchor offshore and transfer goods via barges to port. Chinese firms can help with upcoming port projects in terms of financing, construction know-how or operational expertise, which would not only improve efficiency of logistics, but also enable Chinese companies to form industrial clusters around the ports, industry insiders told Caixin.

“This is the time to lay groundwork for future projects — understand what Bangladesh really needs and how we can participate,” said Pan Dengyu, director of the Chinese Enterprises Association in Bangladesh.

Impact of the tariffs

Bangladesh, with an edge in labor costs and previously lower import tariffs from the U.S. and European countries, has attracted Chinese textile enterprises seeking to diversify production to invest and set up factories there in recent years.

“Industry [in China] is already sluggish due to labor shortages. Our factory in Bangladesh has nearly 1,000 workers, while the one in China has only 40 to 50,” a chairman from a bulk bag company told Caixin.

The rise in U.S. tariffs on Chinese goods may further add momentum to this trend. The Bangladesh Export Processing Zones Authority disclosed at the end of March that 24 Chinese firms had signed agreements to invest $615 million in the country, driven by U.S. tariff policy and Bangladeshi labor advantages. It added that 34 Chinese firms expressed investment intentions in sectors including solar accessory and clothing between August 2024 and March 2025.

“Now that the U.S. has imposed such high tariffs, what will Chinese companies do? Will they set up more factories overseas? Bangladesh welcomes them wholeheartedly,” said a local consultant attending the investment summit.

For existing Chinese businesses in Bangladesh, some manufacturers are shifting their export destination to Europe during the 90-day suspension of so-called “reciprocal tariffs” added to Bangladesh.

While nearly 20% of Bangladesh’s annual garment exports go to the U.S., some Chinese business owners say they are not too worried that the tariffs will hurt the competitiveness of factories in Bangladesh. They noted that manufacturers in other countries with lower tariff rates, such as India, may not be able to meet the U.S. quality standards.

And other major exporting countries such as Vietnam and Cambodia face even higher “reciprocal tariffs,” 46% and 49%, respectively, compared with Bangladesh’s 37%. Some factories in Vietnam and Cambodia have already begun transferring orders to Bangladesh, Caixin has learned.

At the April investment summit, global players beyond China have also been attracted. Textile and clothing businesses from Sweden and South Korea announced plans to build factories or expand investment in Bangladesh, while an economic affairs officer from the German Embassy in Bangladesh told Caixin that many German companies are also interested in investing in the country.

Concerns about stability

Before the 2024 unrest, Bangladesh was expected to enter a new development cycle this year, according to Pan. That outlook has dimmed due to the change in government and delays in large-scale capital investment. “Large projects are rare now, while small ones are more common. But they are easier for local firms to execute, putting foreign contractors at a disadvantage,” Pan said.

In addition, as foreign-invested factories already faced tighter scrutiny when applying for approvals before the political uprising, the current government transition has further slowed administrative procedures. Many Chinese companies and investors have adopted a wait-and-see approach, as final approvals for certain construction projects must wait until after the official election, a Chinese contractor told Caixin.

In mid-April, Bangladesh’s interim government announced the goal of holding the next general elections between December 2025 and June 2026.

Chinese companies now hope that political stability will return soon — paving the way for a new peak in infrastructure investment and bilateral cooperation.

“Bangladesh has strong economic resilience. With a high revenue share from light industry and garment processing, growth is likely to follow as the economy recovers,” Pan said.

Contact reporter Kelly Wang (jingzhewang@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

Image: Olena – stock.adobe.com