Bangladesh is preparing to receive a wave of prospective Chinese foreign direct investment (FDI) as part of a broader economic strategy to enhance trade competitiveness, particularly in the context of its upcoming graduation from least-developed country (LDC) status and mounting foreign exchange constraints.

According to a confidential government intelligence report obtained by The Financial Express, higher Chinese FDI is expected to transform key sectors, particularly as shifting global dynamics and rising labour costs in China prompt the relocation of labour-intensive industries.

The report has been shared with top officials, including the interim government’s finance adviser, the chairman of the Bangladesh Investment Development Authority (BIDA), the commerce secretary, and the chairman of the National Board of Revenue (NBR).

Commerce Secretary Mahbubur Rahman confirmed government awareness of the findings, saying, “The government wants to increase Chinese FDI.”

Bangladesh, the world’s second-largest exporter of readymade garments, is seen as a strong candidate to absorb part of China’s shifting manufacturing base. However, the report identifies 12 major barriers to Chinese investment, including unpredictable tax regimes, bureaucratic delays, energy shortages, political uncertainty, and inadequate infrastructure.

To address these, the report outlines 15 policy recommendations, ranging from allowing profit repatriation in yuan to adopting stable, sector-specific investment strategies and fostering political consensus on FDI.

Currently, Bangladesh accounts for only 0.04% of China’s imports. If this figure were to rise to 1%, export earnings could reach $26 billion annually, the report estimates.

It also notes Bangladesh’s missed opportunity during the 2018 US-China trade war, when investment was redirected to Vietnam and Cambodia. It urges a proactive approach this time to capitalise on emerging shifts.

High-potential sectors identified for Chinese investment include manmade fibre, plastics, toys, fintech, semiconductors, electronics, and renewable energy. China’s interest in local agro-processing—bolstered by its recent approval to import Bangladeshi fruits and investment in solar and battery manufacturing- aligns with Bangladesh’s clean energy targets.