DHAKA (BLOOMBERG) - China is expected to sign off on more than US$23 billion (S$31.9 billion) in loans to Bangladesh to fund a series of large-scale infrastructure projects, as President Xi Jinping starts his visit to Dhaka on Friday (Oct 14).
Mr Xi's visit, the first by a Chinese head of state to Bangladesh in 30 years, is part of the Asian economic giant's ambition to advance its 'One Belt, One Road' initiative - a grand plan devoted to reviving the ancient Silk Road trading route from Asia to Europe by boosting economic ties and investing in transport hubs. He last visited Bangladesh in 2010 as vice-president.
"Bangladesh, with its favourable geographic location and huge population, market potential and cooperation space, is an indispensable partner for China to advance the Belt and Road initiative," Mr Xi wrote in the Daily Star, a leading Bangladesh newspaper.
China and Bangladesh will sign 25 deals, mostly covering railways, roads, electricity and economic zones, Foreign Minister A.H. Mahmood Ali said in Dhaka on Thursday (Oct 13), describing the visit as an "historic new journey".
"Bangladesh is important to China in extending its Belt and Road projects to South Asia and balancing its relations with India," said Dr Sun Shihai, president of the official Chinese Association for South Asian Studies in Beijing. "A major deal like this could certainly bring the relations into a new level."
Indian Prime Minister Narendra Modi announced a US$2 billion fresh line of credit for Bangladesh during his visit to Dhaka last year, but the China deal clearly eclipses that amount.
However, as the loans do not cover military cooperation - an integral part of the ties between Bangladesh and India - relations between the two neighbours would be unaffected by China's loan package, Dr Ahsan H. Mansur, the executive director of Dhaka-based Policy Research Institute, said by phone.
"China has done it in Africa and Myanmar. It has done (it) in Sri Lanka. It's doing it in Pakistan. Now it's in Bangladesh. From China's point of view, it's a good return on investment," Dr Mansur said.
Bangladesh initially sought US$40 billion in funds from China to be spent over five years, according to a letter from Mr Li Guangjun, economic and commercial counsellor at the Chinese Embassy in Dhaka, to the Bangladesh finance ministry.
The full extent of China's loans to Bangladesh is not yet clear as it has been reluctant to make the final number public. Calls to the counsellor's office for comment went unanswered.
Mr Xi arrived in Bangladesh from Cambodia, where he was on an official visit, ahead of a trip to India to attend the Brics Summit to be held in Goa on October 15-16.