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Duty free access to China: RMG exporters need a diversified product basket as well as brand image to gain

Despite having a wide range duty free offering in exporting goods to China, Bangladeshi apparel exporters could not gain from it due to lack of a diversified products basket.

China offered zero-tariff access for 98% Bangladeshi products. As per the latest list, the number of products, which are enjoying duty free market access, stood at 8,930.

China offered zero-tariff access for 98% Bangladeshi products.
Figure 1: China offered zero-tariff access for 98% Bangladeshi products.

According to Export Promotion Bureau (EBP) data, in the fiscal year 2020-21 Bangladesh’s apparel exports to China declined by 17.78% to $271 million, which was $330 million in the previous fiscal year.

On the other hand, during July-February period of the current fiscal year 2021-22 Bangladesh earned $151 million, down by 19.25 percent, which was $187 million in the same period a year ago.

However, overall exports earning from the clothing products rose by 33.81 percent to $31.42 billion, which was in the same period a year ago.

Talking on the issue, trade analysts and economist explained that due to lack of a diversified exports products basket manufacturers are not getting the benefits of duty free benefits.

“Due to sanction and trade conflict with the US as well as environmental issues, China focused on its own market to survive. As a result, Chinese traders and retailers imported less from Bangladesh. That is why, Bangladesh’s exports earnings from apparel goods from China did not increase as expected with the duty free offering,” Md Shahidullah Azim told the Textile Today.

In cashing the duty free opportunity, Bangladesh has to think differently. We have to concentrate on producing winter clothing as China’s weather demands, said the business leader.

In addition, we have to diversify our product basket in order to reach the vast customer base in China, he added.

“Though, the present growth is negative, we are very much optimistic and very hopeful to take the opportunity of duty free market benefits in the coming days. The present negative growth could be due to supply chain disruption caused by the ongoing Covid-19 pandemic,” Mohammad Hatem, executive President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told The Textile Today.

He also said that apparel exporters and the policy makers have to work with the Chinese investors to devise ways to grab more share in their market through move towards value added.

Meanwhile, Bangladesh Garment Manufacturers and Exporters (BGMEA) president Faruque Hassan explained it will take a little bit time to gain from the opportunity to its fullest.

“Bangladeshi apparel makers used to enjoy duty free market access in China but the list of products has been enlarged with the 98% duty free market benefits,” said Faruque Hassan, also Managing Director of Giant Group.

To get buyers and be familiar with the new products, it is taking retime, while the Covid-19 pandemic has negatively impacted the exports to the country.  But it is quite sure Bangladesh will grab more share in Chinese imports of clothing items, said Hassan.

Economists suggested focusing on product diversification centering the Chinese consumers and new investment from the country to learn technical know-how.

“Under the new duty free market access facilities, our exporters will enjoy tax free entree for 60% of its products but exports to China did not increase as much as expected,” said Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD).

Explaining the slower reason for penetration in the Chinese market, the economist said lack of a diversified product basket is the main obstacle for Bangladesh.

To cash the opportunity of duty-free market access, Bangladesh has to develop products that have been included in the new list, said Moazzem.

Meanwhile, Zahid Hussain, former lead economist of World Bank, Dhaka, said Bangladesh needs to tie up with the Chinese investors to develop products for exports as they have the knowledge about the demands and product line.

On the other hand, attracting Chinese investment is very crucial for Bangladesh, which would help a lot in new technology and value added products, he added.

The Bangladesh Embassy in Beijing has recommended the appointment of dealers or agents in China and aggressive marketing to increase the export of high quality products of Bangladesh, including leather products. The well-known brands of Bangladesh were missing in action, as they had no agents or dealers in China

It said local Chinese companies are constantly competing with foreign and multinational companies, but Bangladeshi companies were lagging behind in this regard.

“Bangladesh hasn’t generated a brand image among the consumers of China. In order to enhance the brand image, the big brands of Bangladesh need to open their outlets and offices in China and invest in marketing, promotion, advertisement, cultural exchange, both online and onsite,” said the embassy report.

In addition, the embassy has recommended that urgent steps be taken to arrange visas for Bangladeshi businessmen to China.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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