The arrival of Chinese manufacturers could help Bangladesh diversify beyond RMG and reduce some import dependence—but without local suppliers, skills, and technology transfer, the country may simply become another assembly base in China’s global supply chain
For decades, Bangladesh’s economic relationship with China has been remarkably simple: China makes, Bangladesh imports. That relationship is now taking on another dimension. Chinese manufacturers are increasingly exploring production in Bangladesh, particularly in textiles and apparel, while Chinese businesses already have a significant presence in infrastructure, energy, telecommunications and other industrial activities. The significance goes well beyond the value of individual factory investments. Bangladesh exported US$48.28 billion in merchandise in FY2024-25, according to the Export Promotion Bureau, of which US$39.35 billion came from RMG. At the same time, China remains Bangladesh’s largest import source, with Bangladesh importing roughly US$24 billion worth of goods from China in FY2023-24 against exports of around US$1 billion.
In other words, Bangladesh’s trade relationship with China carries a deficit of roughly US$23 billion. Chinese manufacturing investment could change that equation—from China selling to Bangladesh to China investing in Bangladesh to produce for Bangladesh and the world. But whether that is a transformation or simply a change of location depends on how much of the resulting value Bangladesh can retain.
The investment opportunity is bigger than RMG
The obvious entry point is apparel. Bangladesh already has a manufacturing ecosystem of roughly four million RMG workers, thousands of factories, established buying relationships with global brands and a large network of textile and accessories suppliers. Chinese investors can therefore enter an ecosystem that has taken Bangladesh decades to build.
The more strategic opportunity is what comes next. China dominates global manufacturing in areas ranging from synthetic fibres and chemicals to electronics, machinery, electrical equipment, solar equipment and consumer goods. Bangladesh imports substantial quantities of such products, many of them from China. If Chinese investment moves some of that production into Bangladesh, the country could begin replacing part of the “import from China” model with “produce in Bangladesh”. That could have a direct foreign-exchange benefit if locally produced goods substitute for imports. It could become even more valuable if those factories export. But the distinction is critical. A factory that imports Chinese components, assembles them in Bangladesh and sells them locally creates employment but retains limited domestic value. A factory that develops Bangladeshi suppliers, employs local engineers, trains technicians and exports finished products creates a much deeper economic multiplier.
For Bangladesh, therefore, the value of Chinese FDI should be judged by domestic value addition, not the size of the investment announcement alone.
China+1 is creating the opening
The timing is linked to a broader restructuring of global manufacturing. The US-China trade conflict, technology restrictions, tariffs and supply-chain disruptions have encouraged multinational companies to diversify production under the China+1 model. Vietnam, India, Indonesia, Thailand and Cambodia have all positioned themselves to capture part of that shift. But there is a second layer to the story: Chinese manufacturers themselves are becoming part of China+1. Chinese companies increasingly have reasons to manufacture closer to overseas customers, diversify production risk and establish international production bases. Bangladesh is therefore competing not only for Western companies leaving China but also for Chinese companies expanding outside China.
The competition is serious. Vietnam has developed a large electronics ecosystem around companies such as Samsung, while India is aggressively promoting domestic manufacturing and attracting multinational supply chains. Indonesia offers a huge domestic market and growing industrial capacity. Cambodia competes with Bangladesh in labor-intensive manufacturing. Bangladesh’s advantage is its labor force and established garment ecosystem. Its disadvantage is that its industrial base remains far less diversified.
The RMG lesson: investment must create an ecosystem
Bangladesh’s garment industry demonstrates why foreign investment can have an impact far beyond a factory gate. The sector’s export earnings reached US$39.35 billion in FY2024-25, but its success also exposes Bangladesh’s dependence on a single product category. Chinese investment could help address that vulnerability if it supports man-made fiber, technical textiles, functional fabrics, higher-value apparel and backward-linkage industries. This matters because the global apparel market is not moving only towards cheaper clothing. Demand is expanding in sportswear, performance products, synthetic fibers and technical applications, areas where Chinese manufacturing has considerable upstream strength. The strategic opportunity is therefore not simply to produce more garments. It is to make Bangladesh capable of producing more of the technology and materials behind the garments. That would increase local value addition while reducing the industry’s dependence on imported inputs.
The non-RMG opportunity could be even bigger
The national impact becomes more significant if Chinese manufacturers move into sectors such as electronics, electrical equipment, light engineering, machinery, renewable-energy equipment, plastics and consumer goods. Bangladesh already imports many of these products. That creates a potential import-substitution opportunity. If a product worth US$100 million is currently imported and a foreign-backed factory begins producing it locally, the entire US$100 million does not automatically become domestic economic value. The key question is how much of the product is made locally. If components worth US$80 million are still imported, the domestic gain is much smaller than if local suppliers eventually provide US$50–60 million of the inputs. That is why Bangladesh needs to develop local supply chains alongside Chinese factories.
Chinese investment should create Bangladeshi suppliers, not permanent Chinese suppliers operating inside Bangladesh.
But local manufacturers could also be squeezed
The same investment that creates an opportunity for Bangladesh’s economy could create a threat to individual Bangladeshi businesses. A Chinese manufacturer typically arrives with scale, established procurement networks, technology, access to machinery and a sophisticated supplier base. A small Bangladeshi electronics, footwear, furniture, plastics or light-engineering company may not be able to match those advantages. The result could be lower prices and better products for consumers, but also pressure on domestic producers. The policy challenge is not to protect every local company from foreign competition. Inefficient companies cannot be preserved indefinitely through protection. The bigger concern is premature deindustrialization—local firms disappearing before they have acquired the technology, scale and financing needed to compete. The better approach is to make foreign manufacturers part of the domestic industrial ecosystem: local sourcing requirements, supplier-development programs, technical training and access for Bangladeshi companies to become qualified vendors.
Jobs are not just a headcount
Bangladesh needs productive employment, but the employment effect of Chinese FDI will depend heavily on the industry. A labor-intensive apparel factory can employ thousands of people. An automated electronics or engineering facility can generate much higher output with substantially fewer workers. This means Bangladesh should evaluate investment on two separate measures: the number of jobs created and the quality of those jobs. The second issue is localization of technical positions. Chinese companies may initially bring engineers, technicians and managers from China. That can be justified during construction, equipment installation and technology transfer. But permanent dependence would reduce the human-capital benefit to Bangladesh. A stronger investment framework would measure how many Bangladeshi technicians and engineers are trained, how quickly technical positions are localized, and whether Bangladeshi managers eventually take responsibility for production.
The ideal progression is:
Chinese expertise → Bangladeshi training → local technical workforce → local management → local innovation.
That is how FDI becomes human-capital investment.
And then there is Washington
The US-China relationship gives the story a geopolitical dimension that Bangladesh cannot ignore. The United States remains Bangladesh’s largest individual export market. Bangladesh exported approximately US$8.7 billion of apparel to the US in FY2024-25, making American demand critical to the country’s garment economy. At the same time, Washington and Beijing remain engaged in a broader competition over tariffs, technology, strategic industries and supply-chain security. That creates an unusual commercial triangle.
China has manufacturing scale and capital.
Bangladesh has a large production workforce and an established export base.
The US and Europe have enormous consumer markets.
Chinese investment could allow Bangladesh to position itself between those systems. But it could also make Bangladesh more sensitive to geopolitical scrutiny. A Chinese-owned factory in Bangladesh does not automatically turn Chinese inputs into Bangladeshi-origin goods for the US market. Rules of origin depend on the nature and extent of processing and the applicable trade regime. That distinction will become increasingly important if Chinese companies use Bangladesh as part of a strategy to serve Western markets. For Bangladesh, the answer is not to reject Chinese ownership. It is to ensure that production is genuine, traceable and increasingly localised.
Could Bangladesh become China’s manufacturing bridge to the West?
This is perhaps the most consequential long-term possibility. Imagine a supply chain in which Chinese companies provide capital, machinery and technology; Bangladeshi factories provide labour and increasingly local inputs; and finished products move into US, European and other global markets. That could turn Bangladesh into a significant China-linked export manufacturing platform. But it would also expose the country to geopolitical risk. If Washington becomes increasingly concerned about Chinese ownership in strategically sensitive industries, Bangladesh could face greater scrutiny over technology, data, supply chains and origin. The country therefore needs diversification on both sides. It should attract Chinese investment while also increasing investment from Japan, South Korea, Europe and other Asian economies. It should expand US and EU exports while developing markets in India, ASEAN, the Middle East and elsewhere.
Economic diversification is increasingly becoming geopolitical insurance.
The India-Vietnam test
Bangladesh also needs to understand that Chinese capital has choices. Vietnam has already demonstrated how foreign investment can transform an economy’s export structure. Samsung’s manufacturing presence helped establish Vietnam as a major electronics-export base and encouraged the development of supporting industrial capabilities. India, meanwhile, is offering increasingly aggressive incentives for electronics and other manufacturing through programmes such as its production-linked incentive schemes. Bangladesh cannot compete with India on market size or Vietnam on electronics depth. Its strongest argument must therefore be a combination of competitive manufacturing costs, export infrastructure, workforce capability and a growing local market. That requires improvements in ports, energy reliability, customs, industrial finance and policy predictability. Without those, China+1 investment may simply go elsewhere.
What happens to Bangladesh’s trade deficit?
This is ultimately one of the most important national questions. Chinese FDI could help Bangladesh reduce its dependence on imported finished goods if factories produce locally. But if those factories import almost everything from China, the trade impact could be far less impressive. A Chinese factory could therefore produce two very different outcomes.
China → machinery/components → Bangladesh factory → Bangladesh market
would leave Bangladesh still heavily dependent on Chinese inputs. But:
Chinese capital + Bangladeshi labor + Bangladeshi suppliers → Bangladesh production → global exports
would create a much stronger domestic economic multiplier. The difference is localization.
Bangladesh needs a new FDI scorecard
For every major manufacturing project, Dhaka should track more than the investment amount.
| Indicator | What Bangladesh should measure |
| FDI realised | Capital actually invested, not announced |
| Employment | Bangladeshi jobs and wage levels |
| Skills | Workers, engineers and technicians trained |
| Local sourcing | Share of inputs purchased domestically |
| Technology | Technology and know-how transferred |
| Exports | Foreign-exchange earnings generated |
| Value addition | Economic value retained in Bangladesh |
| Import substitution | Finished imports replaced by local production |
| Supplier development | Bangladeshi firms integrated into the chain |
That is the difference between an FDI policy and an industrial policy.
Three possible Bangladeshes
The Chinese manufacturing push could eventually produce three different outcomes. In the first, Bangladesh becomes an assembly economy—Chinese capital, Chinese inputs, Bangladeshi labour and limited local value addition. In the second, it becomes an export platform, attracting foreign factories that use Bangladesh to serve global markets and gradually diversify exports beyond RMG. The most ambitious outcome is an industrial ecosystem, where foreign manufacturers create local suppliers, transfer technology, develop Bangladeshi engineers and generate new domestic industries. The third is the outcome Dhaka should pursue. Bangladesh has already demonstrated that it can build a globally competitive manufacturing industry. Its next challenge is to reproduce that success across a broader industrial base.
Chinese investment can accelerate the process, but it cannot determine the outcome. That depends on whether Bangladesh can convert foreign capital into local capability. If it does, the country’s relationship with China could evolve from one dominated by a US$20-billion-plus trade deficit into one increasingly defined by investment, production and exports. If it does not, Bangladesh could find itself in a different kind of dependence: no longer simply importing Chinese products, but assembling Chinese supply chains on Bangladeshi soil. The choice is therefore bigger than whether Bangladesh welcomes Chinese factories.
The real question is whether Bangladesh can make Chinese investment part of a Bangladeshi industrial strategy—while keeping access to American and European markets and maintaining economic relationships with India, Japan, South Korea and the rest of Asia. For Dhaka, the objective should be neither China dependence nor China avoidance. It should be value capture. Because in the next phase of global manufacturing, the countries that win will not necessarily be those that attract the most factories. They will be the countries that capture the most value from the factories they attract.
Author
Farhana Shraboni
Apparel Professional
