New Delhi: China's Shanghai and Shenzen stock exchanges have concluded a deal to purchase 450 million shares, or 25 per cent equity, in Bangladesh's top bourse - the Dhaka Stock Exchange - for $120 million, outbidding a counter offer by India, with sheer money power and better terms.

The purchase is being seen more as a strategic buy to help China raise funds for its Silk Route projects in the South Asian region. This is China's second stock market buy in South Asia.

A year earlier, the two Chinese bourses had bought a 40 per cent stake in Karachi-based Pakistan Stock Exchange in an $85-million deal.

India's National Stock Exchange had offered taka 15 a share in the Dhaka bourse compared with the Chinese offer of taka 21 a share. The NSE did not offer any technical assistance and sought two board-level positions, while the Chinese consortium offered $37 million to upgrade the Dhaka bourse and asked for just one director on the board.

Interestingly, the CEO of the Shenzen Stock Exchange, Wang Jianjun, underlined the logic for the buyout by stating that his exchange "has actively served the Belt and Road Initiative to promote financial infrastructure cooperation (and) expand market connectivity".

Analysts believe the stake buys have been done to eventually raise money for China's Silk route projects in South Asia. North Block mandarins said India did not understand the logic for the huge Chinese offer or the nature of the deal and, hence, chose not to raise the offer.

"This is not a commercial deal. The NSE dealt with it as a commercial proposition. For the Chinese, it was and is a strategic deal, just as the China-Pakistan Economic Corridor. We did not understand this and let the NSE offer stand as a normal commercial proposition," said officials.

China has announced plans to invest $38 billion in Bangladesh under its Belt and Road Initiative (BRI) and $62 billion in the economic corridor with Pakistan.

Biswajit Dhar, a professor of JNU and former director general of the Research and Information System for Developing Countries, said, "It is a case of frying fish with fish oil. The Chinese are looking at controlling the financial framework of Bangladesh and will use both the Karachi and Dhaka bourses to raise money for its BRI projects through Chinese companies."

In the past decade, China has invested or committed to more than $150 billion in the economies of Bangladesh, the Maldives, Myanmar, Pakistan, Nepal and Sri Lanka.

"The Sri Lankan experience has shown that China tends to push host governments into running up huge debt for the infrastructure it provides and that very often becomes unsustainable for the country concerned," said Pinak R. Chakravarty, a former secretary in the external affairs ministry.

India moves

India, which has rival infrastructure plans in the neighbourhood, has mainly depended on government resources and loans from its Exim Bank and from multi-lateral agencies.