Bangladesh is expecting a formal declaration of the beginning of a negotiation of a free trade agreement (FTA) with China during Prime Minister Sheikh Hasina's visit to China next week, State Minister for Commerce Ahasanul Islam Titu said.

The commerce ministry has already sent a proposal to the foreign ministry to include the FTA issue as part of the agenda for discussion during the premier's four-day visit to China starting on July 8, he said.

The first round of talks for advancing the FTA between the two nations is yet to take place, but a joint feasibility study has already been conducted on the possible deal, Titu told The Daily Star by phone yesterday.

Bangladesh has been trying to sign trade deals with major partners, including China, the largest import source for the country, mainly to retain the duty benefit even after graduation from the least developed country (LDC) category.

"A team from the Chinese Exim Bank is coming to Dhaka today or tomorrow to discuss a $5 billion trade facility and this issue may also be discussed during the prime minister's visit to China," Titu said.

Under the $5 billion worth of loans to be disbursed in yuan, the local importers will be allowed to pay the import bills to China with yuan.

Being the second largest apparel exporter worldwide after China, Bangladesh heavily relies on China for its raw materials like fabrics and chemicals at competitive prices.

China is the single largest trading partner of Bangladesh now.

Bangladesh imports nearly $23 billion worth of raw materials, capital machinery, textile fabrics and chemicals, yarn, woven fabrics, garment articles and food items from China, according to the commerce ministry data.

Of the total annual import duty revenue of Bangladesh, one third comes from Chinese import duty. Bangladesh government earns more than Tk 25,000 crore or $2.14 billion as duty on import of Chinese goods in a year.

However, if Bangladesh graduates to a developing nation from the LDC in November 2026, the country will not be able to collect this big amount of revenue as import duty from Chinese goods. Bangladesh will have to liberalise its tariff structure for other countries as a developing nation.

China signed 22 FTAs with 29 countries, including nations like Mauritius and Cambodia.

Chinese investors and entrepreneurs are interested to sign the FTA with Bangladesh mainly for two reasons. The primary reason is that the Chinese entrepreneurs want to relocate their old factories and other industries to Bangladesh and want to re-export goods from China under a liberal duty structure.

Bangladesh cannot utilise the Chinese trade facility of 98 percent duty privilege because of not having diversified export products.

Of the total annual exports of Bangladesh, over 84 percent are garment items while China, the largest apparel supplier in the world, imports garment items worth only $10 billion a year.