China signs deals worth billions with Bangladesh as Xi visits

DHAKA (Reuters) - Chinese President Xi Jinping, stepping up a competition with India for regional influence, said on Friday ties with Bangladesh would be enhanced to a strategic partnership as the two countries signed 27 agreements worth billions of dollars.

China's President Xi Jinping attends a welcoming ceremony for Belarussian President Alexander Lukashenko (not in picture) at the Great Hall of the People in Beijing, China, September 29, 2016. REUTERS/Jason Lee

Xi, making a first trip by a Chinese president to Bangladesh in 30 years, boosted involvement in Bangladeshi infrastructure at a time when Japan has also increased investment in the country located on the Bay of Bengal.

“We agreed to elevate the relations between China and Bangladesh from a closer comprehensive partnership of cooperation to a strategic partnership of cooperation,” Xi said after talks with Prime Minister Sheikh Hasina.

India has long considered Bangladesh as part of its area of influence and under Prime Minister Narendra Modi has boosted economic links with it as well as with other neighbors including Nepal and Sri Lanka.

Last year Modi announced a $2 billion credit line during a visit to Dhaka, but China is set to go well beyond that.

Ahead of Xi’s visit, Bangladesh junior finance minister M.A. Mannan said the deals the two countries planned to sign would involve Chinese funding of about $24 billion, Dhaka’s biggest foreign credit line yet.

Among the agreements sealed on Friday was a 1,320 MW power plant that China will build, officials said.

China’s TBEA signed a power grid deal worth $1.6 billion with Dhaka Power, following a pact that Jiangsu Etern’s consortium signed on Thursday to strengthen Bangladesh’s power grid network valued at $1.1 billion.

“We reached a consensus to work together in trade and investment and other key areas such as infrastructure, agriculture, energy and power, information technology and transportation,” Hasina said.

Xi visited Dhaka en route to a BRICS summit of the world’s leading emerging economies in Goa, India.

Zhao Gancheng, director of South Asia Studies at Shanghai Institute for International Studies, said there was room for both India and China to support development in Bangladesh.

“I really don’t think there is a zero sum game going on... Bangladesh welcomes both Chinese and Indian investment,” said Zhao.

China is currently Bangladesh’s biggest trade partner with annual turnover of around $10 billion which is heavily in favor of Beijing.

“Xi’s visit will set a new milestone,” minister Mannan told Reuters. “Our infrastructure needs are big, so we need huge loans.”

Bangladesh has backed Xi’s “One Belt, One Road” initiative to boost trade and transport links across Asia and into Europe, seeing it as an opportunity to lift growth.

India has reservations about the plan, amid worries that it is an attempt to build a vast zone of Chinese influence.

($1 = 78.40 taka)

Writing by Sanjeev Miglani; Editing by Mike Collett-White and John Stonestreet