China is ramping up its presence in Bangladesh’s power sector and now accounts for just over a third of foreign investment in the sector as the South Asian nation’s energy struggles lead to factory closures and financial pressures.
As of March, China was the single largest foreign investor in Bangladesh’s power sector, holding a foreign direct investment (FDI) stock of USD 1.18 billion, equivalent to 34% of the sector’s total FDI of USD 3.46 billion, according to Bangladesh Bank data. Last year, China displaced Singapore as Bangladesh’s top investor in the sector—the city-state had a 28.5% share of FDI stock in the sector as of March.
Although China’s investments are mostly concentrated in fossil fuels, renewable energy is a growing focus of activity. The country contributed over 50% of total investment in Bangladesh’s renewable energy industry last year, according to the Centre for Policy Dialogue (CPD). Meanwhile, Chinese exports of grid and battery technologies to Bangladesh have been on the uptick in recent months, according to data from Ember, an energy think tank, although they remain short of peaks set in the years before 2024’s popular uprising in the country.
The appeal for Chinese companies goes beyond simply exporting solar panels or wind turbines. For these companies, Bangladesh offers a chance to combine technology, capital, engineering expertise, and long-term project development in an emerging renewable energy market. Renewable energy only makes up 5.4% of the country’s power generation capacity.
Bangladesh has long been plagued by energy shortages and fuel cost pressures, but these have intensified recently due to the US-Iran war and more recently an outage at a liquefied natural gas terminal. The situation has also been exacerbated by the country’s growing reliance on imported fossil fuels.
Many Chinese firms—including PowerChina, China Machinery Engineering Corporation, China National Machinery Import & Export Corporation (CMC), China Energy Engineering Corporation, and Harbin Electric—see opportunities in addressing Bangladesh’s power shortages. Bangladesh, for its part, has offered incentives such as tax holidays and duty exemptions on imported equipment.
“Bangladesh’s energy demand is growing, and alternative energy sources are now a clear priority,” said Ashik Chowdhury, executive chairman of the Bangladesh Investment Development Authority. “For Chinese investors with strong capacity in power infrastructure, solar, storage, equipment, and project delivery, Bangladesh is a practical destination. It offers a growing market where that capacity can be deployed, and both governments have signaled strong interest in deeper investment cooperation in this sector.”
Chinese investments in Bangladesh’s power sector initially ramped up in 2016 following a state visit by Chinese President Xi Jinping. These included major coal, grid, and transmission projects, such as the 1,320 megawatt Payra Thermal Power Plant, a joint venture between North-West Power Generation Company Bangladesh and CMC.
In recent years, investments have also expanded into renewable energy, as China’s strength in those technologies has grown. North-West Power Generation and CMC have established the joint venture Bangladesh-China Renewable Energy Company Limited (BCRECL), for example.
In solar energy, China has developed the Sirajganj Solar Park, the Pabna Solar Plant, and the Mymensingh Solar Plant, while the Maheshkhali Solar Plant, the Jamalpur (Madarganj) Solar Plant, and the Kurigram Solar Park are under development. In wind energy, its projects include the Payra Wind Facility and the Cox’s Bazar Wind Power Plant, with the latter already in operation.
“Our goal was to develop large-scale renewable energy projects capable of generating a significant amount of electricity, which required substantial financing. It was difficult to secure that level of financing from local sources,” said Masudul Islam, BCRECL’s CFO. “That was one of the main reasons we partnered with the Chinese company. Besides, technological support was an important factor.
“When we implement solar or wind power projects, we have to import most of the equipment from China because Bangladesh does not yet manufacture these components at scale. Therefore, our partnership with the Chinese company is valuable not only for financing but also for access to Chinese technology, expertise, experience, and technical know-how,” Islam added.
Bangladesh approved in early July a set of fiscal and policy measures for renewable energy. These include tax exemption facilities for eligible solar power producers and suppliers, tax rebate support for solar electricity users, reduced customs duty on relevant equipment, value-added tax exemption for power generation, and exemptions from selected duties and taxes on specific renewable-energy goods.
However, land remains one of the biggest constraints in Bangladesh, as grid-scale solar projects have a large footprint. The government is examining public-private partnerships to tap unused or underused government land for solar projects, as well as better coordination between agencies.
“Most available land is already used for agriculture, housing or industry, making it difficult to allocate space for solar projects without compromising food production or displacing communities,” said Mostafa Al Mahmud, president of the Bangladesh Sustainable and Renewable Energy Association. “Now, the government has focused on renewable energy, not on fuel-based power plants, and has targeted raising the share of energy from renewable sources to 20% by 2030.
“Many companies, including Chinese ones, are waiting to invest in the renewable sector, and Bangladesh can get a huge amount of investment in the sector if certain policy issues are resolved quickly,” he added.
ActionAid Bangladesh estimates that the 2030 target will require up to USD 980 million in investment annually even before considering funding for battery storage and grid modernization, with this increasing to USD 1.46 billion annually between 2031 and 2040 to reach a 30% share by 2041.
Bangladesh’s energy crisis may ease in the short term, but it cannot be resolved in a durable way without a decisive transition to renewable energy, said Khondaker Golam Moazzem, research director at the CPD.
“Bangladesh must look beyond fossil fuels and expand its partnership with China in renewable energy to attract greater investment and accelerate its energy transition,” he said. “We should capitalize on China’s leadership in clean energy by deepening bilateral cooperation.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.