China Country Risk Report

Published 23 June 2015 | Quarterly

  • 54 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
China Country Risk Report

Core Views

  • As evidenced by its lower real GDP growth target of 7.0% in 2015, Beijing is looking to maintain a managed slowdown of the economy going forward. That said, we believe that downside pressures on growth are only increasing as a result of the ongoing property price correction amid an environment of high corporate debt, and we see real GDP growth falling below this target at 6.7%.

  • Xi Jinping has largely consolidated his leadership position, and we believe that he is firmly in control of the Communist Party. This means that policy-making will remain highly centralised and generally cohesive over the medium term. While there remain divides on how to manage the economy, we believe that an increased emphasis will be placed on monetary stimulus as growth continues to slow. That said, targeted fiscal measures are also likely as the pace of the slowdown has likely surprised Beijing to the downside, and growth-negative reforms will be increasingly difficult to implement.

Major Forecast Changes

  • The PBoC continues to shoulder the brunt of the responsibility for supporting economic growth, and we believe that it will pursue even more aggressive easing ahead. As such, we forecast for additional cuts to its benchmark interest rate totalling 50bps before the end of 2015, taking the rate to 4.60%.

Key Risks To Outlook

  • A key downside risk to China's economic growth outlook would be a surprise downturn in the US economy. The world's largest economy contracted in Q115, and while we expect growth momentum to improve over the remainder of the year, this is not a foregone conclusion. Should the US enter into recession, China could face a perfect storm scenario in which the government would be forced into much more aggressive stimulus measures which would greatly undermine the economy's long-term stability.

  • A hard-landing scenario is also a key risk in China, as falling property prices amid rising domestic debt levels could set the stage for a financial...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
NPC To Offer Up Few Surprises As Growth Target Lowered
8
China's National People's Congress, the more important of the government's annual lianghui (two meetings), began on March 5 and will
China's National People's Congress, the more important of the government's annual lianghui (two meetings), began on March 5 and will
offer a view into the government's policy-making agenda over the coming year
Table: Political Overview
8
Long-Term Political Outlook
10
Major Challenges Over The Coming Decades
10
China faces myriad economic, social and environmental challenges over the coming decades that could seriously test the Communist
China faces myriad economic, social and environmental challenges over the coming decades that could seriously test the Communist
Party of China's ability to govern
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Despite Trade Surplus Blowout, Rebalancing Taking Shape
14
TABLE: Economic Activity
14
Fiscal Policy
16
TABLE: Fiscal Policy
16
Monetary Policy
17
PBoC Easing To Continue As Slowdown Deepens
17
TABLE: Monetary Policy
18
Currency Forecast
19
More Pressure On CNY Following Rate Cut
19
TABLE: BMI CURRENCY FORECAST
19
TABLE: Current Account
20
Chapter 3: 10-Year Forecast
23
The Chinese Economy To 2024
23
Further Slowdown As Economy Rebalances
23
TABLE: Long -Term Macr oec onomic Forecasts
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
TABLE: Operational Risk
28
Availability Of Labour
29
TABLE: Asia - Availability of Labour Risk
30
TABLE: Top 10 Source Countries For Migrant Workers
31
TABLE: Lab our Force Empl oyment By Sect or ('000)
32
Crime Risk
34
TABLE: Asia - Crime Risk
35
TABLE: Crime Statistics
36
Chapter 5: Key Sectors
39
Automotives
39
TABLE: Autos Total Market - Historical Data And Forecasts
39
Food & Drink
43
TABLE: Food Consumption Indicators - Historical Data & Forecasts
46
Other Key Sectors
47
Table : Telecoms Sector Key Indicat ors
47
Table : Pharma Sector Key Indicat ors
47
Table : Defence & Security Sect or Key Indicat ors
47
Table : Oil & Gas Sect or Key Indicat ors
48
Table: Infrastructure Sector Key Indicators
48
Table : Freight Key Indicat ors
48
Chapter 6: BMI Global Macro Outlook
49
Global Outlook
49
Deflationary Pressure
49
Table : Global Assumpti ons
49
Table : Devel oped States , Real GDP Growt H, %
50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table : Emerging Mar kets , Real GDP Growth , %
51

The China Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in China. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of China's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of China's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise China's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in China, including currency volatility, the commodity price boom and protectionist policies.

The China Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the China' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for China through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The China Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for China and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on China, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in China over the next 5-years?

BMI's China country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the China Market - Political Strengths, Weaknesses, Opportunities and Threats facing China.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for China's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of China’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark China's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in China?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks China against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate China’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in China will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in China's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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