On August 5, 2024, violent student protests erupted in Bangladesh over the reservation quota for the offspring of the 1971 War of Liberation, leading to the resignation of Prime Minister Sheikh Hasina and the formation of an interim government. This political turmoil has raised concerns about the stability of the country and its impact on international relations, particularly with China and India.
China, which has invested heavily in Bangladesh and is its largest trade partner and weapon exporter, has shown signs of dissatisfaction with Hasina's regime. The Chinese government has adopted a noncommittal stance on offering loans to stabilize Bangladesh's economy, and Hasina had to cut short her visit to China. Chinese media have described the situation using terms like 'coup', 'dictatorship', and 'student protests' [9d8b155f].
In addition to China, the unrest in Bangladesh is also expected to have significant repercussions for India, its largest trading partner in South Asia. India's exports to Bangladesh rose from US$3.2 billion in 2010-11 to US$16.2 billion in 2021-22, but have since declined to US$11 billion in FY2023-24. Imports from Bangladesh peaked at US$2 billion in 2022-23 but moderated to US$1.8 billion last year [9f35025e].
The ongoing political instability may reduce Bangladesh's import demand, particularly for non-textile items, and could impact agricultural exports due to the Kharif harvest. Bangladesh is a key market for India's textiles, accounting for 20% of exports, and the unrest has already halted exports of raw cotton, oil meals, and spices. India's engineering goods exports are also at risk as the textile sector in Bangladesh relies heavily on imports from India [9f35025e].
Chinese scholars have expressed hope that the new government in Dhaka will recalibrate ties with China, especially given that both Myanmar and Bangladesh are seen as gateways to the Indian Ocean [9d8b155f]. The outcome of the interim government and its policies will play a crucial role in shaping the future of Bangladesh's relationships with both China and India, as well as the overall economic landscape in the region [9d8b155f].