Bangladesh-China relations in the post-Hasina era: A delicate dance with the dragon

The political landscape of Bangladesh underwent a seismic shift with the ousting of Prime Minister Sheikh Hasina in August 2024. 

Among the many challenges now confronting the interim government led by Nobel laureate Muhammad Yunus, redefining Bangladesh's foreign policy is paramount. Central to this re-examination is the relationship with China, a key economic and strategic partner for Bangladesh and a dominant force in South Asia's geopolitical order.

While China seeks new ways to strengthen its influence during this transitional period, Dhaka must walk a fine line between reaping the benefits of Chinese investments and avoiding the risks of debt dependency. At the same time, regional power dynamics involving India and the United States will further complicate this diplomatic recalibration, with Bangladesh attempting to assert its sovereignty and national interests in a highly polarised geopolitical landscape.

A brief recap

During its early years under the Awami League, Bangladesh leaned toward India and the Soviet bloc, which limited early engagement with China. This remained largely true during Sheikh Hasina's first stint in power, as the BNP, the other major political party, shared much closer ties with China. The BNP, historically more critical of India, has consistently viewed China as a counterbalance to Indian influence. 

However, after returning to power in 2009, Sheikh Hasina attempted to walk a tightrope fostering ties with China while maintaining extremely close relations with India. 

"There's a massive opportunity for China in Bangladesh's healthcare sector. A large number of Bangladeshis travel to India for advanced medical treatment every year. However, due to the post-August 5 situation, India has restricted visas for Bangladeshis. China can seize this opportunity and invest in Bangladesh's healthcare sector."

Dr Imtiaz Ahmed Retired Professor of International Relations at the University of Dhaka

China's economic engagement with Bangladesh grew significantly during her time, with the two nations elevating their relationship to a "comprehensive strategic cooperative partnership." 

Key collaborations, such as the construction of the Padma Bridge and power plants under Chinese funding, exemplified this growing partnership. During Hasina's 2019 visit to Beijing, 27 bilateral agreements were signed, spanning sectors like infrastructure, energy and trade.

The Belt and Road Initiative (BRI) played a pivotal role in shaping Bangladesh-China relations. Dhaka's participation in the BRI symbolised its commitment to leveraging China's ambitious connectivity agenda. Under the Belt and Road Initiative, China has built seven railways, 12 highways, 21 bridges, and 31 power and energy projects in Bangladesh. 

However, China has suffered setbacks in Bangladesh, often as a result of Hasina's attempts to strike a balance between Chinese and Indian interests. Even as Beijing increased its financing for Bangladesh, Dhaka rejected a deep-sea port on Sonadia Island that was supposed to be built by a Chinese firm.

More recently, Hasina is believed to have irked China by deciding to take up India's offer to fund the Teesta River water management project – for which Beijing had offered $1 billion. Analysts believe that's one reason why China declined to provide a $5 billion loan Hasina had requested during her trip to Beijing, one of the last official trips she would take as prime minister. 

The transition

The abrupt end of Hasina's regime has left many wondering how Bangladesh's relationship with major regional powers is shaping up. China is chief among those powers. And China's response has been on brand.

After Hasina's ouster from power, China, known for its pragmatic diplomacy, has signalled a cautious yet opportunistic approach. Experts believe that China is more focused on reaching its strategic goals than being too close to any one political party. 

"The Sino-Bangladesh relationship is moving at its usual pace. The relationship remains the same and I don't see hints of any major changes moving forward. We have a strong trade relationship with China, both import and export. They are involved in infrastructure development here. They have invested here," said Humayun Kabir, a former ambassador of Bangladesh to the United States. 

He continued, "There might be some new dimensions moving forward. The Chief Advisor has hinted at more cooperation when it comes to renewable energy, e-governance issues moving forward."

The interim government faces the intricate task of redefining foreign policy amidst domestic upheaval and shifting international expectations.

"I do think that Beijing is poised to enjoy a special opportunity with this new government, just because the new government is not going to let India be such a big factor in terms of how it engages in its relationship with China. So that's just going to help Beijing in the end," Michael Kugelman, the director of the South Asia Institute at the Wilson Center, told TBS earlier. 

Analysts suggest that Beijing is keen to strengthen its foothold in Bangladesh, potentially capitalising on the transitional period to advance strategic projects that may have previously encountered resistance. 

Economic realities

Economically, China's investments in Bangladesh have been a double-edged sword. On one hand, projects like the Dhaka-Chittagong Highway and coal-fired power plants have contributed to the country's development. On the other, concerns over rising debts and the opaque terms of Chinese loans have sparked debates about the sustainability of such partnerships.

According to Dr Imtiaz Ahmed, a retired Professor of the Department of International Relations at the University of Dhaka, in the current situation, China will look at whether it benefits, particularly from economic projects, in Bangladesh. 

"There's a massive opportunity for China in Bangladesh's healthcare sector. A large number of Bangladeshis travel to India for advanced medical treatment every year. However, due to the post-August 5 situation, India has restricted visas for Bangladeshis. China can seize this opportunity and invest in Bangladesh's healthcare sector," he said.  

He is also of the opinion China can create facilities, including visa facilitation, to enable Bangladeshis to seek medical treatment in China.

The interim government plans to reassess existing infrastructure agreements to reflect a broader effort to address allegations of fiscal mismanagement during Hasina's tenure. This scrutiny aligns with Dhaka's attempts to stabilize an economy burdened by falling foreign exchange reserves and mounting external debt.

China's BRI projects are likely to face enhanced scrutiny as Bangladesh navigates these economic challenges. Some think there is a possibility a handful of projects that might have been in the pipeline or in progress (in the starting phase) might face some uncertainty and discontinuity. 

Bangladesh has already requested China to lower its existing loan interest rates from 2-3% to 1% and extend the repayment period from 20 years to 30 years.

Experts agree that Bangladesh-China trade relations will likely progress positively under the current government. "China is providing 100% duty-free access to Bangladeshi products, which is a significant development. This will be a major game-changer. Currently, our exports to China are between $600 and $700 million. But with this duty-free access, we can quickly increase exports to China to $1 billion," said economist Dr Mahfuz Kabir in a recent interview with a local TV channel. 

While Beijing's financial incentives remain attractive, Dhaka must balance the benefits of Chinese investments against the risks of debt dependency.

"I do not see Bangladesh falling into any such traps. The previous government had sought payment support from China, if we get that, at this moment that would be a relief for us," said Kabir. 

Geopolitical dynamics: Balancing powers

The recalibration of Bangladesh's foreign policy will inevitably involve a reassessment of its relationships with regional powers. India, which enjoyed strong ties with Hasina, perceives her ouster as a strategic loss. 

"Our different relationships depend on different needs. What Bangladesh needs from India is different from China. I think the interim government is looking at the relationship through that lens. And I don't see any major change in that relationship. It is rumoured that our Foreign Secretary will visit China on 20 January, this will further consolidate the relationship," said Kabir.

China will view this political transition as an opportunity to strengthen its influence in Bangladesh. But will that put China at loggerheads with the US whose relationship with Bangladesh seems to have rejuvenated post-July as Dr Yunus shares close ties with the US and its Western allies?

"What is the basis of our relationship with the US? One of them is the fact that we are a democratic country, this is an ideology which aligns with the West. We are an open market economy, which is a Western concept. We believe in global connectivity, another Western thing. The nature of our relationship with the US is very different from our relationship with China," explained Kabir. 

"We have strong economic ties with China but we do not share their political ideologies. They have their concerns, we have to clarify our stance and convince them," he added.

But the US is waging a trade war against China. Will that have a spillover effect in Bangladesh?

"While the US and China are engaged in a broader geopolitical competition, this rivalry does not necessarily manifest uniformly in every country. Despite their strategic competition, the US and China remain key trading partners for each other and they cooperate on a wide range of global issues," said Anu Anwar, a Fellow at the Faculty of Arts and Sciences and a Non-resident Associate at the John K. Fairbank Center for Chinese Studies, Harvard University.

According to Anu, as long as Bangladesh avoids becoming a strategic pawn for either power, both the US and China could find mutual benefit in supporting a secure, democratic Bangladesh capable of pursuing its national interests.

Public sentiment and domestic considerations

Now, the perception that China was losing ground to India in the race for influence in Bangladesh during the last days of Hasina in power may prove to be a blessing in disguise. 

New Delhi is widely believed to have backed Hasina, turning a blind eye as she cracked down on opposition and dissenting voices. According to Dr Imtiaz Ahmed "India has always kept a closer relationship with Awami League. And after the July Uprising, they have become alienated from the people of Bangladesh."

That strategy has inextricably linked India to Hasina's Awami League in the minds of ordinary Bangladeshis. While the people of Bangladesh consider China a much friendlier country. 

"Bangladesh is traditionally seen as in the Indian sphere of influence. If the change of government has an impact over that, I don't think the Chinese government will necessarily see itself as a net loser from the political turmoil," Yun Sun, director of the China Program at the Stimson Center, told The Diplomat.

China's strategic interests in Bangladesh, particularly concerning the Bay of Bengal and BRI, suggest that Beijing will continue to court Dhaka with economic incentives and diplomatic overtures. Bangladesh's response will need to balance these opportunities against the imperatives of sovereignty, economic prudence and regional harmony.