Lessons from China for Bangladesh’s export diversification
Dr. Nasim Ahmed :
Bangladesh’s export economy relies heavily on ready-made garments, which make up over 80% of the country’s export earnings. Dependence on a single sector makes the economy vulnerable to external shocks, tariff changes, and declining global demand for apparel. Due to ongoing issues like tariff hikes on Bangladeshi exports in foreign markets and regional trade disruptions, diversification is both necessary and urgent.
China’s shift from a low-income, agriculture-based economy to the world’s largest exporter offers valuable lessons. Over the past four decades, China transitioned from exporting a few labor-intensive products to a highly diversified export mix that includes electronics, machinery, textiles, chemicals, and high-tech goods. Bangladesh can learn from this transformation.
Bangladesh’s graduation from Least Developed Country status in 2026 will lead to the loss of duty-free access to many developed countries, raising tariffs and increasing global competition. The country also faces obstacles in expanding its export range due to limited technological skills, low investments in innovation, poor logistics, and restricted access to finance for small and medium enterprises (SMEs) trying to enter new sectors.
China’s export journey provides several key lessons for Bangladesh. Beginning in the late 1970s, China’s economic reforms focused on structural transformation. The country integrated into the global economy by investing in a range of export-focused manufacturing industries.
Over time, China shifted from labor-intensive products, such as basic textiles, to more complex goods, including electronics, machinery, and high-value materials.
Expanding into medium- and high-complexity products such as performance textiles, technical garments, pharmaceuticals, and electronics can increase Bangladesh’s average export values and improve resilience.
This demonstrates China’s move up the “value chain,” where export diversification pairs with industrial sophistication.
China’s investment in transport, port, and energy infrastructure significantly reduced trade costs and boosted export competitiveness. Developing large port facilities, road networks, and industrial clusters helped ensure efficient production and export logistics.
Bangladesh’s persistent logistical bottlenecks,such as inefficient cargo handling and limited warehousing,hinder export diversification. By investing in logistics infrastructure and streamlining customs and export procedures, Bangladesh can reduce transaction costs and attract more export-oriented industries.
China’s export diversification was bolstered by significant investment in education, vocational training, and technology adoption. Technical skills and innovation became key drivers of China’s competitiveness, facilitating growth in high-tech manufacturing and digital industries.
Bangladesh also needs to emphasize skills development, especially in STEM (science, technology, engineering, and mathematics) education, vocational training, and digital literacy to encourage diversification into advanced manufacturing and service sectors.
This includes bolstering research and development ecosystems and promoting private sector involvement in innovation.
China’s long-term planning, stable industrial policies, and export incentives have been crucial in encouraging export diversification. The government actively supported specific sectors through subsidies, special economic zones, and export incentives, which motivated both domestic companies and foreign investors.
Bangladesh can adopt these policy tools by aligning national strategies like Vision 2041, which emphasizes export diversification with practical incentives for various sectors. This may include preferential tax policies for new industries, targeted export financing, and increased support for SMEs entering new markets.
China’s rise was closely connected to its integration into global value chains (GVCs). By attracting foreign direct investment (FDI) and participating in multinational production networks, China leveraged global production expertise while boosting its domestic capacity.
Bangladesh’s current integration into GVCs remains in the early stages outside the apparel sector. Attracting FDI into various sectors, such as electronics assembly, automobiles, solar panel manufacturing, or high-end textile production, could help Bangladesh become more connected to global production networks.
Initiatives to encourage Chinese firms to relocate production or supply chain segments to Bangladesh are already underway and, if managed effectively, can enhance export diversification.
Building on lessons from China, Bangladesh should focus on the following strategic priorities to diversify its export portfolio:
1. Bangladesh should identify and prioritize sectors with a comparative advantage and export potential, such as pharmaceuticals, ICT services, agro-processing, leather and leather goods, and specialized textiles. Building cluster-based industrial ecosystems around these sectors can enhance competitiveness.
2. Free trade agreements or economic partnership agreements can expand markets and reduce tariff barriers for various products. Bangladesh must pursue substantial market access deals with key partners to increase export opportunities beyond traditional markets.
3. Enhancing the ease of doing business, protecting investors’ rights, simplifying administrative procedures, and offering export-oriented incentives can attract both domestic and foreign investment into new export sectors.
4. Diversified products often face stricter quality and compliance standards. Bangladesh needs to enhance its compliance capacity, especially regarding environmental, safety, and international quality certifications, to compete in high-value markets.
By learning from China’s systematic approach to diversification involving infrastructure investment, human capital development, policy support, and integration into GVCs, Bangladesh can expand its export base, enhance competitiveness, and build resilience against external shocks.
Strategic diversification is not just about adding new products; it is about transforming Bangladesh’s economic fabric into a more innovative, inclusive, and future-ready system.
(The author is Associate Professor of Public Policy Bangladesh Institute of Governance and Management (Affiliated with the University
of Dhaka)