Under the leadership of Sheikh Hasina, Bangladesh developed strong economic relations with China. In fact, in recent years, China has been Bangladesh’s number one trading partner, not just in the Belt and Road Initiative (BRI), but also in providing the small nation with plenty of military hardware. Yet, Hasina never let this interfere in Bangladesh’s relationship with India.
In March of this year, however, when Muhammad Yunus – the chief advisor of the Bangladeshi interim government – visited Beijing, he declared that his nation’s bond with China had entered “a new stage”. From Yunus’s perspective, the trip to China ended up earning him $2.1 billion in loans, grants, and FDI. As far as China was concerned, considerable strategic gains were made with the signing of a $400-million deal to renovate the Mongla Port. In addition, it was agreed that China would step up her involvement in the Teesta River Comprehensive Management and Restoration Project.
There was no way for India not to take the latter agreement as a personal insult. That’s because Bangladesh has been demanding a larger portion of the Teesta River’s waters from India for more than a decade. The Teesta Barrage is built near the strip of land connecting mainland India with the Northeastern states, which is only a few hundred miles from an area of the map where China is currently bolstering her military presence.
Does Yunus’s gesture reflect a deep-lying enmity among Bangladeshis towards India? Is Bangladesh likely to ally with China to the detriment of her relations with the US? Join us for some answers. We’ll tailor our analysis for readers with an economic bent and those involved in online stock trading.
Import Restrictions
Following complaints from Bangladeshi textile millers about their inability to compete with cheap Indian yarn imports, Bangladesh (on March 27th this year) closed their doors to Indian yarn when arriving via five land ports. Instead, India’s yarn products would have to take the longer and costlier sea route to reach their destination. India responded on April 8th by shutting down the transshipment facilities – opened in 2020 – which had allowed Bangladeshi exports to travel through India’s land customs stations, ports, and airports.
Since a full 11% of Bangladesh’s GDP comes from garment exports, India’s move was potentially devastating for their economy. “Bangladesh simply cannot afford to not trade with full horsepower when it comes to India”, says Sanjay Kathuria of the Centre for Social and Economic Progress. “It’s a massive market and hugely under-exploited from Bangladesh’s point of view”. Aside from not making economic sense, this tit-for-tat came at an unfortunate time – during the US-tariff-led global trade war – when both nations might have benefited from closer economic ties. It appeared that Yunus was partially responding to burgeoning anti-India sentiment in his country, some of it stoked by social media.
How Widespread is the Feeling?
In the aftermath of Hasina’s departure in 2024, some of the public demonstrations featured anti-India rhetoric, especially in response to the fact that the deposed ruler had found refuge in India. Negative feelings towards India are not new in Bangladesh, particularly in recent years. There have been unfortunate deaths in border incidents; Bangladeshis have repeatedly asked for an improved water-sharing deal; religious tensions continue to rankle. In the financial year 2023-24, India ran a trade surplus with Bangladesh of $9.2 billion, exacerbating the feeling among Bangladeshis that their economic relationship with India is not fairly balanced.
At the same time, “it would be inaccurate to suggest that Bangladesh is uniformly antagonistic toward India”, insists Ashok Swain, professor at Uppsala University in Sweden. “Cultural connections remain strong”. Bangladesh remembers the fact that India gave refuge to 10 million of her refugees back in 1971, and a few protest banners don’t necessarily reflect the feelings of the majority. Swain believes that what we are seeing is not so much a deep-rooted hatred for India, as an increasingly pronounced demand for fair respect and autonomy.
Relations with the United States
In recent years, the United States has made her displeasure known about Dhaka’s friendship with Beijing. This is certainly significant in Bangladeshi eyes, since the USA is their biggest export market. The present interim government has tried to get into President Trump’s good books, reducing tariffs on incoming US goods, broaching the subject of an energy deal, and introducing Starlink to their citizens. Nevertheless, Trump put Bangladesh down for import tariffs of 37%, although they were temporarily lowered to 10%.
Given the dire economic consequences of losing America as an export market, Yunus’s bold overtures toward China appear all the more out of place. In the words of the Atlantic Council, “Dhaka should at least aim to understand Washington’s evolving red lines before doubling down on closer ties to Beijing”. This is especially so since Yunus doesn’t necessarily represent the will of most Bangladeshis, not having been democratically elected.
Final Thoughts
We mustn’t forget that India and Bangladesh share a history of security and trade cooperation that benefits both nations considerably. In 2024, for instance, Bangladesh bought as much as 45.9% of India’s cotton yarn exports, leaving India with much to lose from a breakdown of friendly relations with her eastern neighbour.
Even if Yunus feels his country has something to gain economically from cementing relations with China, he shouldn’t lose sight of the potential consequences of doing so. Severing ties with either India or the United States is something Bangladesh can scarcely afford to do. When it comes to Yunus’s invitation for China to engage in the Teesta River Project, which Sheikh Hasina had handed over to India, this was unnecessarily provocative. And rushing ahead to make this drastic shift in foreign policy when the lines of the global trade war are still being drawn, and without the explicit support of the Bangladeshi population, certainly seems over-hasty. Keep an eye on the evolving situation, especially if you have a hand in online stock trading with Indian shares.