Bangladesh turns to China for investment while resetting India ties

Bangladesh's new government, led by Prime Minister Tarique Rahman, has sought greater Chinese investments and partnership to revive a stuttering economy, even as it attempts to re-balance ties with neighbouring India.

Rahman went to Malaysia and China in his first overseas official visit last month, signalling the direction of Dhaka's foreign policy. Analysts say the choice of destinations reflects Dhaka's effort to recalibrate its strategic priorities. While Rahman first visited Malaysia, his trip to China is seen as the more significant.

India has historically been the traditional port of call for newly-elected South Asian leaders. Some in India have viewed Rahman's China visit as a message to Delhi, which has maintained close ties with ousted Bangladeshi leader Sheikh Hasina.

Among several bilateral agreements, Rahman's outreach to Beijing for help managing the Teesta River and a deal to develop a special economic zone near Mongla port have attracted particular attention. These are closely watched in Delhi as the two Asian giants compete for influence in Bangladesh.

Relations between Dhaka and Delhi turned frosty after the overthrow of Prime Minister Sheikh Hasina in August 2024 in a mass uprising. She fled the country and took refuge in Delhi. Diplomatic ties remained strained after the interim government led by Muhammad Yunus took office, with India avoiding high-level visits.

After Rahman took over following a landslide victory for his Bangladesh Nationalist Party (BNP) in February, both sides have taken initiatives to reset their ties. Former Indian foreign secretary Shyam Saran noted a relative relaxation of tensions, with cross-border economic activities gradually returning to normal and India issuing tourist visas to Bangladeshis.

Passenger bus services between India and Bangladesh have partially resumed after an 18-month gap, with routes now operating between Kolkata and Dhaka, and between Dhaka and Agartala. When the war in the Middle East broke out earlier this year and hit global fuel supplies, Delhi sent thousands of tonnes of emergency fuel via the cross-border Friendship Pipeline to Bangladesh.

Last month, India's new High Commissioner to Dhaka, Dinesh Trivedi, took charge. In a rare move, Delhi elevated him to cabinet rank, signalling its intent to reset bilateral ties. Despite diplomatic tensions and tit-for-tat trade restrictions during the interim government, bilateral trade last year stood at around £13bn, mostly in India's favour.

Nevertheless, the rapprochement between Dhaka and Delhi is not as expected, and there are continuing irritants. A strong anti-India sentiment, mainly for supporting Hasina, and attempts by the Indian Border Security Force to push people deemed illegal immigrants into Bangladesh have triggered controversy and anger in Dhaka. Bangladeshi officials say India has pushed in thousands of people, mainly Bengali-speaking Muslims, in recent years without following any due repatriation process.

Bangladeshi analysts also point out that alleged inflammatory comments against Bangladesh during India's West Bengal state elections by Hindu-nationalist politicians are sending mixed signals to Dhaka. In May, the Hindu nationalist BJP ousted the regional Trinamool Congress in West Bengal, ending its nearly 16-year rule in the state bordering Bangladesh.

Any Chinese role in managing the Teesta River is a sensitive security issue for India. During Rahman's visit to Beijing, Bangladesh said the two sides agreed to conduct a joint technical feasibility study on managing the river. Experts say the river needs dredging, desilting and measures to restore its flow for agriculture. Former foreign secretary Saran says any Chinese involvement in a project close to India's border would be a matter of concern.

India and China have a decades-long border dispute, with a brief war in 1962 ending in a humiliating defeat for India, and more recent border clashes claiming lives on both sides. Any Chinese role in the project would bring it closer to the strategically vital Siliguri Corridor, or 'Chicken's Neck' – the 22km strip linking India's mainland to its seven north-eastern states.

Bangladeshi officials say previous governments also invited India to join the Teesta project, but Delhi took too long to decide. They argue China has the expertise and financial resources to deliver a project of this scale. Beijing has stepped in to allay India's concerns, with Chinese Foreign Ministry Spokesperson Guo Jiakun stressing that China-Bangladesh cooperation does not target any third party.

China is already Bangladesh's biggest defence supplier, accounting for more than 70% of its arms imports. Dhaka also owes Beijing more than $6bn (£4.5bn). During Rahman's visit, China also offered to develop the China-Myanmar-Bangladesh Economic Corridor – connecting China's Yunnan province to the two countries.

India has long viewed South Asia as its sphere of influence, but China has steadily expanded its footprint in Bangladesh, Sri Lanka and the Maldives. India's efforts to rebuild ties with Bangladesh's new government are complicated by the continued presence in Delhi of deposed prime minister Sheikh Hasina, whose extradition Dhaka has sought. Hasina was convicted in absentia of crimes against humanity over a crackdown on student-led protests that left hundreds dead; she denied the charges and was sentenced to death by a special tribunal last year.

As long as Hasina is in Delhi, it may be politically difficult for Rahman to visit India, says Saran. But some experts say Rahman may still visit Delhi as India remains too important an economically and strategically neighbour for Dhaka to ignore. India also knows that stable ties with Bangladesh are vital to security in its north-east, where several ethnic separatist groups operate. For Rahman, balancing ties with the two regional powers will be a delicate diplomatic act.