China Political & Business Risk Report

Rebalancing priorities


MEDIUM RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

The country risk assessments are your North Star metrics to make the right decision for your business and understand the risks in international trade. We have always the best solution for your needs

GDP USD11064.7bn (World ranking 2, World Bank 2015)
Population 1371.2mn (World ranking 1, World Bank 2015)
Form of state Communist State
Head of government Li KEQIANG
Next elections 2017 (autumn), 19th Central Committee of the Communist Party
  • Strong FX reserves and external surpluses
  • Large domestic market
  • Huge industrial base
  • Solid growth prospects
  • Low public and external debt
  • Improvement in macro-prudential management
  • Increasing market orientation
  • Ageing population
  • Difficult business environment, lack of transparency
  • High corporate debt
  • High inequality, low share of private consumption to GDP regarding the economic performance
  • Competitiveness erosion
  • Key sectors with overcapacities (steel, e.g.)
  • Continued geopolitical tensions with key countries in the region

Slowing pace

The economy started 2017 on a positive note supported by improving exports and supportive macro-policies. Retail sales growth remained firm, industrial production and investment showed some signs of revival.

Growth is expected to decelerate somewhat towards +6.3% in 2018 (after +6.7% in 2017) as a result of a moderation of credit growth. The central bank and the financial regulator have stepped up measures to contain financial risks namely bubbly property markets, a rise in shadow banking activities and an elevated corporate debt. Fiscal policy will remain expansionary to avert a sharp slowdown. Private consumption would continue to grow at a strong pace driven by continued rise in wages and (still) solid labour market. Risks, on balance, are still elevated. Domestic imbalances (debt and excess capacity, e.g.) prevail and require quick actions from policy makers. External sources of risk stem from fragile trade environment, and uncertain (trade, monetary) policy orientations in the US. 

While financial authorities tighten, the government keeps the fiscal tap open

Fears of deflation have reduced compared to last year. Signs of reflation have broadened. Producer price inflation returned to expansion. Consumer inflation is at a decent level, hovering in a +1% - 2% range. Against this background, financial authorities are set to prioritize financial stability over growth. While the official stance is neutral, signs of a gradual tightening are increasing. These includes especially: tightened lending rules to limit corporate leverage and risky lending (shadow banking, e.g.); stricter rules on property purchases in order to cool housing prices.

Public finances are set to deteriorate further as the government extends it support to the economy. Public deficit will be around 4% GDP in 2017. However, rising public should not pose a significant risk to the economy in the short-term due to a relatively low base (below 60% GDP) and a favourable composition (mainly held domestically).

External position shows signs of weaknesses but remains strong overall

The current account surplus is large due to a robust trade surplus. Despite a strong fall in reserves (see figure 1) over the two past years, external vulnerabilities remain under control with large import cover and low external debt. On the currency front, downward pressures persist due to diverging monetary policy with the United States and investors’ concerns.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
United States 18.0%
10.4% Korea, Republic of
Hong Kong 14.6%
9.0% Japan
Japan 6.0%
8.6% China, Taiwan Province of
Korea, Republic of 4.4%
8.6% United States
Germany 3.0%
5.0% Germany

Trade structure by product

(% of total)

Exports Rank Imports
Electrical machinery, apparatus and appliances, n.e.s. 13%
20% Electrical machinery, apparatus and appliances, n.e.s.
Telecommunication and sound recording apparatus 12%
9% Petroleum, petroleum products and related materials
Office machines and automatic data processing machines 9%
9% Metalliferous ores and metal scrap
Articles of apparel & clothing accessories 8%
5% Professional and scientific instruments, n.e.s.
Miscellaneous manufactured articles, n.e.s. 7%
5% Road vehicles

As a result of the rebalancing policy in China, direct financing or bank loans are shrinking sharply and extending to more and more sectors. Consequently, DSO remains high and late payments are not efficiently regulated.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

The court system is complex and suffers from a lack of transparency, delays and high costs. As enforcement results are poor, amicable or non-litigation collection is the preferred option.

The insolvency framework is complex, with liquidation as the default procedure.​

Download the entire collection complexity PDF:

Collection complexity China

pdf | 8.2 MB


Contact Euler Hermes

Economic Research Team

Contact Mahamoud Islam

Economic Research Team

Subscribe to Our Newsletter

Sign up today!