China Surpasses Investment Milestones to Become Bangladesh’s Second-Largest FDI Source

Chinese FDI accounted for more than 18 percent of total inflows last year, reaching a six-year high as cumulative investment approached the $2 billion mark. The structural reorientation is now measurable — and it is arriving precisely as the domestic economy faces compounding energy deficits and shifting export dynamics.

Capital flows follow infrastructure — then diversify

The capital composition reveals a deliberate expansion beyond China's traditional infrastructure footprint in Bangladesh — roads, bridges, tunnels, power plants built over several decades. Power still attracted the single largest FDI tranche at $448.18 million in 2025, but food processing drew $410.62 million and textiles and apparel registered $360.16 million. Banking, telecommunications, chemicals and pharmaceuticals, agriculture, leather and information technology also registered substantial inflows. The portfolio diversification signals that Chinese capital is no longer primarily financing concrete and steel; it is embedding itself across Bangladesh's productive sectors at a pace that raises legitimate questions about long-term structural dependency.

Energy deficit complicates the investment thesis

The inflows are landing in an economy struggling with a severe gas shortage. Bangladesh's daily gas demand stands at roughly 3,800 to 4,000 million cubic feet per day (MMCFD), while normal supply hovers around 2,600 to 2,700 MMCFD — a structural deficit exceeding 1,100 MMCFD, according to the Ministry of Power, Energy and Mineral Resources. A technical failure on July 22 at one of the country's floating storage and regasification units cut LNG supply to the national grid by approximately 450 to 500 MMCFD, pushing total supply down to about 2,150 MMCFD and widening the shortfall to nearly 1,700 MMCFD. Gas allocation to power plants has fallen from around 900 MMCFD to 700 MMCFD, reducing gas-fired electricity output from roughly 5,200 megawatts to 3,500 MW and creating nationwide shortages of between 2,000 and 3,000 MW. Export-oriented factories — particularly in readymade garments, textiles and steel — are relying on costly diesel generators, increasing production costs and jeopardising delivery schedules. Domestic gas production, meanwhile, continues to decline by approximately 150 MMCFD annually as major fields deplete.

Export outlook: tariff leverage meets production headwinds

The tariff environment offers a partial offset. Following new US frameworks tied to forced-labour compliance, Bangladesh's readymade-garment exports face a 25.6 percent tariff rate, which, as the Dhaka Tribune reports, gives the country a strategic advantage over competitors China and Vietnam. Yet Bangladesh's exports opened fiscal year 2027 in the red, according to New Age BD, suggesting the tariff differential alone is insufficient to overcome production bottlenecks driven by the energy crisis. Chinese FDI in power and energy — the largest single sector — could eventually help close the supply gap, but the lag between capital commitment and installed capacity remains measured in years, not quarters.

The macro picture is now one of deepening capital integration with Beijing at a moment of acute infrastructural stress. Whether Chinese investment alleviates or compounds the structural vulnerabilities will depend on sectoral allocation — and on how quickly the energy grid can absorb new capacity. That is the number worth tracking through FY27.