Home / CPD in the Media / Dr Khondaker Golam Moazzem on trade with China

Dr Khondaker Golam Moazzem on trade with China

Local importers should bargain on the prices of Chinese products as they (Chinese exporters) are gaining a dividend following the devaluation.

Published in The Financial Express on Sunday, 13 September 2015.

Yuan depreciation may help BD gain in trade
Economists expect cheaper imports from China

Jasim Uddin Haroon

Economists say the devaluation of Chinese currency RMB, also known as yuan, against the US dollar will not harm Bangladesh’s external trade rather help through cheaper import of raw materials from the giant economy.

If effective negotiation is done, it will bring a blessing in disguise for the country, according to the economists and trade experts.

Almost all emerging economies have adjusted their respective currency, including the rupee, as a result of around 4.0 per cent RMB (Renminbi) devaluation in the past month.

China weakened its currency mainly in order to boost exports after meticulously doing some economic arithmetic in a changing paradigm.

Economists argue that Bangladesh imports nearly US$8.0 billion worth of goods from China and most of the imports are industrial raw materials meant for garment shipment.

They calculated that Bangladesh might gain around $350 million a year, around 50 per cent of Bangladesh’s yearly export to China, as the imports from China have become cheaper than before.

They think this will not erode competitiveness on the global market as China now makes shipment of high-end clothing to Europe and the North American countries.

And they suggest that Bangladesh should negotiate further with the Indian exporters following the latest devaluation in China — world’s second-largest economy — to derive optimum benefit out of a tradeoff.

Dr Ahsan H Mansur, executive director at the private think-tank Policy Research Institute of Bangladesh (PRI), said: “It (devaluation of RMB) will not hurt Bangladesh’s trade.”

Rather, he added, Bangladesh could save around $350 million as a result of the deviation.

Dr Mansur argued that Bangladesh imports mostly garment-related raw materials, stretching from cotton to fabrics. “Cheap raw-material procurement again helps raise competitiveness in the global market of Bangladesh-made products.”

He said: “I would argue that the real concern should not be the Yuan devaluation. Rather, policymakers should focus on the impact of China’s possible economic slowdown on Bangladesh’s economy, and the policy measures should be taken accordingly.”


Yuan depreciation may help BD gain in trade

A Chinese economic slowdown will definitely narrow the window of opportunities.

Global stocks — in USA, Europe and Asia — suffered selloff as fears intensified over the Chin slowdown in the third week of August.

The serial fall came after a closely watched independent survey, China Manufacturing Purchasing Manager’s Index, dropped to 47.1 in the first three weeks of August, down from 47.8 in July.

Dr Khandker Golam Moazzem, additional director at the country’s oldest private tank — Centre for Policy Dialogue (CPD) — said local importers should bargain on the prices of Chinese products as they (Chinese exporters) are gaining a dividend following the devaluation.

“We’ll get some automatic financial benefits and it will be much higher once there is further cut of Chinese-made products.”

China is Bangladesh’s largest bilateral trading partner with around 8.0 billion worth of imports and around $800 million exports.

Mr Moazzem said Bangladesh should also consider the currency strategies of competitor countries.

“Many developing economies from Asia to Africa have responded with the devaluation in China and it might emerge as threats for export markets,” he said.

Manjur Ahmed, an adviser of country’s apex trade-promotion organisation, FBCCI, sees many benefits from the cheaper Chinese goods that they import, such as Chinese-made heavy machinery, other industrial equipment.

He said there are many industrial units that use Chinese parts for assembling motorised vehicles like two-wheelers. “It seems to me that the parts to be consumed by local industries will be cheaper.”

But he cannot say for sure that the local consumers who will purchase the finished products for the domestic market will derive any financial benefit.

Bangladesh also imports a substantial number of goods, from toys to high-value electronics.

The devaluation should come as a boon to consumers.

Bangladesh’s merchandise export to China is worth around $800 million a year, and mostly jute and jute goods and clothing constitute the consignments.

Anwar-Ul Alam Chowdhury Pervez, a former chief of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said Bangladesh’s clothing export to China has been growing in recent years.

He thinks the devaluation is unlikely to hit the export of clothing as China imports mainly low-end wear which the country does not produce on the grounds of high production cost.

Some apparel exports that fetched Bangladesh in 2013-14 some $241.37 million may face trouble.

Overall exports to China have also been on the rise: US$746.19 million came in 2013-14, with a whopping 63 per cent rise year-on-year.

Bangladesh’s imports from China amounted to US$7.5 billion in the fiscal year 2013-2014 and exports fetched US$ 746 million during the same period, according to official data.


Check Also

Professor Mustafizur Rahman attends workshop & conference in Kerala

Professor Mustafizur Rahman, Distinguished Fellow at Centre for Policy Dialogue (CPD), recently attended a workshop …

Leave a Reply

Your email address will not be published. Required fields are marked *