With China in play, India's economic leverage on Bangladesh faces challenge

The response of the current Bangladesh government, headed by Chief Adviser Muhammad Yunus, has left much to be desired.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

A regime change in Bangladesh in August this year and the subsequent violence against Hindus, followed by deep concerns expressed by the Indian government regarding the security and safety of Hindus, has raised significant issues. The response of the current Bangladesh government, headed by Chief Adviser Muhammad Yunus, has left much to be desired.

The violence against Hindus, led by Jamaat-e-Islami, Hizbut-Tahrir, and Hifazat-e-Islam under the aegis of Yunus' government, has attracted a strong response from the common Hindus of not only India but also from Hindus across the world.

One of the issues that has come up in this context is whether India can put pressure on the Yunus government by taking a tough stand on the economic front, as India is the second biggest trade partner of Bangladesh in Asia. Bangladesh is India’s biggest trade partner in South Asia, and India is the second biggest trade partner of Bangladesh in Asia. Bangladesh exported USD 1.97 billion of goods to India in FY 2023-24. In FY 2023-24, the total bilateral trade was reported as USD 14.01 billion.

Bangladesh’s economy is heavily dependent on India, as the latter has extended four Lines of Credit (LOC) to Bangladesh in the last eight years, amounting to around USD 8 billion for the development of infrastructure in various sectors, including roads, railways, shipping, and ports. In addition to the LOCs, India has also been providing grant assistance to Bangladesh for various infrastructure projects, including the construction of the Akhaura-Agartala rail link, dredging of inland waterways in Bangladesh, and the construction of the India-Bangladesh Friendship Pipeline.

However, any strong economic sanctions against Bangladesh could provide China with an opportunity to further enhance its influence. China has already been openly backing the Yunus government and has quickly switched sides.

Chinese Gambit

When Chinese Ambassador Yao Wen made an introductory call to Yunus, the latter not only called for greater economic cooperation between the two countries but also encouraged Chinese investors to shift their local plants, especially solar panel manufacturing units, to Bangladesh.

In the last week of September, Yunus met Chinese Foreign Minister Wang Yi on the sidelines of the UN General Assembly at the UN headquarters. Dhaka Tribune reported that Chief Adviser’s Press Secretary Shafiqul Alam said after the meeting, “If Chinese investment comes to Bangladesh for solar panel manufacturing, it will be a milestone as it is a massive investment and will help create huge jobs."

The report further added that Yunus stressed closer relations with China and opening "a new chapter" in the ties between the two nations. He also called for increasing technological collaboration between the companies of both nations. "We would love to collaborate with Chinese companies. We have a lot of scope to work together," Yunus said.

China has been the largest trading partner of Bangladesh for more than a decade now, with the volume crossing USD 25 billion. According to Chinese official media, "As of the end of 2023, China's investment stock in Bangladesh had increased to nearly USD 1.4 billion, and there were nearly 700 Chinese-funded companies in Bangladesh."

One of the key strangleholds of China over Bangladesh is due to the latter’s heavy dependence on the former to run its textile sector, which has put Bangladesh on the global map. Bangladesh exports around USD 45 billion of textiles every year, making up 80 percent of its total exports. More than 70 percent of raw materials for manufacturing fibre clothing in Bangladesh are imported from China.

Bangladesh is also a prominent buyer of Chinese weapons. More than 73 percent of Bangladesh’s imports of arms come from China, according to the Stockholm International Peace Research Institute (SIPRI). Bangladesh also owes China as much as USD 6 billion in foreign debt.

Wait and Watch

It is important for India to wait and watch and not give a knee-jerk reaction as far as economic ties with Bangladesh are concerned, as China is waiting to seize the opportunity. With the Republican President Donald Trump expected to assume the US Presidency in another month and a half, there are indications that there will be a reversal of the US President Joe Biden’s policy on Bangladesh.

It is a well-known fact that the US deep state, backed by the Biden administration, played an important role in appointing Yunus at the helm of affairs in Bangladesh. Yunus is known to have made a huge donation to the Hillary Clinton Foundation in 2016, which was said to have upset Trump. Trump has already condemned the attacks on Hindus in Bangladesh.

Johnnie Moore, a former advisor to Trump, recently slammed the Yunus government and Biden administration over the plight of Hindus in Bangladesh. In a recent interview, he said, “We’re unsure who’s truly responsible, but from what I see, Muhammad Yunus is failing. That’s what’s happening in Bangladesh right now. As the country’s leader, or interim leader, there are no clear aspirations for the Bangladeshi people. If you can’t manage something as basic as ensuring people’s safety—protecting people—then something’s wrong. If the rule of law is so ineffective that instead of due process, a lawyer is killed, that’s unbelievable. I was shocked by Yunus’s response, as well as the Bangladesh government’s. They claim it’s exaggerated, that it’s not as serious as it appears.”

Moore, who is also the former Commissioner of the United States Commission on International Religious Freedom (USCIRF), further added, “Human rights and religious freedom organizations should raise their voices at every opportunity. Unfortunately, when the Hindu community faces persecution around the world, fewer people speak up. I’m committed to doing the opposite, and I’m calling on global human rights and religious freedom organizations to join me. When Muhammad Yunus became interim leader of Bangladesh, he made promises about democracy, the rule of law, and values cherished by the West and international institutions. This is now an existential crisis, not just for the minorities of Bangladesh but for the country as a whole. It’s time to advocate for human rights and religious freedom and make our voices heard.”

Earlier Sanghnomics columns can be read here.