Bangladesh has made careful use of the money it has received from China, including that under the Belt and Road Initiative (BRI). It is a good example of prudent management and how to avoid a “debt trap”.

A three-day BRI forum closed in Beijing on Saturday. It was attended by China and 37 other countries. President Xi Jinping said that China signed US$64 billion in deals at the event. Chinese officials said that they would commit to more sustainable financing standards, following criticism that some BRI projects left countries mired in debt.

Bangladesh, which attended the forum, is not among them. Its foreign exchange reserves reached US$32.236 billion as of the end of February this year, equal to more than six months of imports. It is setting up a sovereign wealth fund worth US$10 billion, to pay for long-term physical infrastructure development. Over the last 10 years, it has increasingly financed development projects from its own budget rather than foreign loans.

It has also been careful to diversify its supply of funds, including Japan, India and international financial institutions as well as China.

“We have economic relations with China and with many other countries,” said Information Minister Dr. Hasan Mahmud last week. “We have US$8.2 billion in loans from India. We do not want to become dependent on any country.”

“Bangladesh has gained the economic power to service its own loans linked to the BRI,” said Minister of State for Foreign Affairs Mohammed Shahriar Alam. It expects economic growth of 8.13 percent this financial year, up from 7.86 per cent the year before, which would make it the fastest-growing economy in Asia.

China is the country’s number one trading partner. Bilateral trade in 2018 was US$18.74 billion, up 16.8 percent from 2017.

China has funded numerous projects in the country, including eight “Friendship Bridges” and a major international conference centre in Dhaka. It is developing a 750-acre industrial park in Chittagong, mainly for use by Chinese manufacturing firms.

State-run China Harbour Engineering holds a 70 percent share in a joint venture formed for the park with the Bangladesh Special Economic Zone Authority. It is due to become fully operational in 2023. Chittagong is the country’s most important port for foreign trade.

The biggest single Chinese infrastructure project is a six-kilometre bridge over the Padma River, known in India as the Ganges; it will for the first time connect the southwest with the northern and eastern regions by road and rail.

Beijing has provided more than US$3 billion for the project. The bridge is expected to boost the country’s GDP by 1.2 percentage points. The contractor is state-owned China Railway Group. The bridge is due to open at the end of 2020.

China is also investing in the country’s first deep-sea port in Payra, on the Ramnabad Channel near the Bay of Bengal; it will serve southern Bangladesh as well as Nepal and Bhutan. It is due to open in 2030, with a capacity of six million TEU containers a year.

In May 2018, the Dhaka Stock Exchange (DSE) sold a 25 percent stake for US$119 million to a consortium of the Shanghai and Shenzhen stock exchanges. DSE Managing Director Majedur Rahman said the exchange had conducted a long negotiation with the Chinese side, as well as with the Indian Stock Exchange which presented a rival bid; it chose the Chinese bid on price and competence.

“We found them to be a good partner, as our capital markets are still very small, and they were offering both new technology and a long-term partnership,” Rahman said.

A Chinese firm, Zhejiang Jindun Pressure Vessel Co. Ltd., has offered to invest US$5 billion in a special economic zone to build up heavy industry near Chittagong, including a 2.6-gigawatt power plant. This would be the largest single investment in the history of Bangladesh.

In August 2018, Beijing’s Ambassador in Dhaka, Zhang Zuo, said Chinese firms wanted to invest in Bangladesh in fisheries, agro-processing, footwear, processed food and ready-made garments.

The key for Bangladesh, as it is for other countries that use BRI money, is to ensure that it is well spent and produces a return that allows repayment of debt.

Minister of State Alam said that his country had signed many contracts with multiple companies and countries. It was a competitive bidding process, with a preference for firms that set up in Bangladesh and brought their own loans. Such prudent management of money can ensure that countries do not fall into a “debt trap”.