Fitch China Trade and Investment Risk Report

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1、Q4 ChinaChina T Tr rade and Inade and Inv vesestment Risk Rtment Risk Reporteport Includes the Fitch Solutions Operational Risk IndexContentsTrade And Investment Risk.4Trade And Investment Risk Key View.4Trade And Investment Risk SWOT .6Economic Openness Analysis .7Government Intervention Analysis

2、.20Legal Environment Analysis .27Trade And Investment Risk Methodology.33 20 2019 Fit19 Fitch Solutions Grch Solutions Group Limitoup Limited.ed. All rights rAll rights reserveserved.ed.All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use o

3、f subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Fitch So

4、lutions Group Limited.All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of

5、any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.This report from Fitch Solutions Macro Research is a product of Fitch Solutions Group Ltd, UK Company registration number 0

6、8789939 (FSG). FSG is an affiliate of Fitch Ratings Inc. (Fitch Ratings). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright 2019 Fitch Solutions Group Limited.China Trade and Investment Risk Report | Q4 THIS COMMENTARY IS PUBLISHED BY FITCH SOL

7、UTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings credit ratings. Any comments or data included in the report are solely derived from FitchSolutions Macro Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Macro Research. 3Trade A

8、nd Investment RiskTrade And Investment Risk Key ViewKey View:Chinas large domestic market, investment incentives in high value-added sectors, high research and development expenditure, andrelatively stable political environment are all conducive for foreign investment. Intellectual property protecti

9、on is expectedto improve over the coming years as the Chinese government seeks to move up the value chain, andsignificant progress has been madein reforming state-owned entities. Efforts are also being made tofurther reform the financial sector by increasing market access and liberalising capital ma

10、rkets over the coming years, as well as cracking down on the shadow banking sector. However,the trade tensions with the US have weakened the countrys trade growth,targeting itsMade in China 2025 initiative and affecting export volumes, as well as businesses in industries such as electronics and mach

11、inery. Taking these factors into consideration, we awardChina a moderate score of 57.7out of 100 for overall Trade and Investment Risk, placing the country ninth out of 18 states in the East and South East Asia region.Trade Talks Entering Final Stages China 0 = lowest risk. Source: Fitch Solutions T

12、rade and Investment Risk IndexEconomic Openness (48.7/100): China continues to have one of the highest trade volumes in the world; however, the trade tensions with the US have weakened the countrys trade growth. Consequent heightened tariffs between the two superpowers have further added to the burd

13、en of high labour costs in China, making it costly to operate in the country. This has led to many businesses, particularly in manufacturing, moving their production lines to alternative centres in the region, such as Vietnam and Cambodia.That said, an end to the trade tensions may be on the horizon

14、 as further tariff hikes have been delayed due to substantial progress in talks between the two sides. We are also seeing China move towards liberalisation, withBeijing stepping up efforts to open up the domestic market to foreign players amid pressures from trading partners. An adoption of a more c

15、onsistent and transparent system for foreign investors is underway, as well as continued cutting of import tariffs (for partners other than the US) over the coming years. We also expect to see state-owned entity (SOE) reforms proceeding at a faster pace due to a more reform- minded leadership, with

16、the focus being on optimising the ownership structures of SOEs by encouraging private investment. However, full-scale privatisation is still not on the agenda.Government Intervention (56.9/100): The Chinese economy is characterised by a strong state presence, with a high number of state-owned enterp

17、rises (SOEs). However, significant progress has been made in reforming SOEs, and we expect the administrationChina Trade and Investment Risk Report | Q4 THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings credit ratings. Any comments or data included

18、in the report are solely derived from FitchSolutions Macro Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Macro Research. 4led by President Xi Jinping to remain committed to conducting SOE reforms at a gradual pace over the coming years

19、. The country also operates a number of special economic zones, which offer more liberal operating environments with incentives such as lower tax rates, streamlined bureaucracy and reduced customs tariffs, among others. In addition, Chinas financial markets are highly sophisticated and well integrat

20、ed globally, with efforts being made to further reform the financial sector. The country is also cracking down on shadow bankingin order to mitigate systemic financial risks that could threaten the wider economy. These reforms are likely to be positive for the country over the long term, although th

21、ey may somewhat constrain access to funding for smaller firms.Legal Risk (67.7/100): Xi Jinpings government has been strengthening policies to bolster bureaucratic reforms, which have yielded efficiency gains for procedures surrounding opening a new business, registering a property and obtaining con

22、struction permits, among others. China has also bolstered its contract enforcement capabilities and can therefore offer increased protection to investors involved in contractual disputes. The Chinese government has been pressing forward with efforts to open up the economy to foreign investment and s

23、trengthen the protection of intellectual property rights, as the country seeks to move up the value chain. That said, there are still some hurdles to overcome, such as continuing to tackle corruption and addressing the preferential treatment afforded to local firms, which can limitfurther improvemen

24、t of the countrys legal environment.Our Operational Risk Index quantitatively compares the challenges of operating in 201 countries worldwide. The index scores each country on a scale of 0-100, with 100 being the lowest risk state. The entire index consists of 24 sub-index scores and 84 individual s

25、urveys and datasets, which all contribute to the headline score. A full methodology can be found at the end of the report.CHINA - TRADE AND INVESTMENT RISKEconomic OpennessGovernmentInterventionLegalTrade And InvestmentRiskChina score48.756.967.757.7East and South East Asiaaverage55.359.655.456.8Eas

26、t and South East Asiaposition (out of 18)121269Asia average44.353.546.948.2Asia position (out of 35)151569Global average49.350.450.149.9Global position (out of 201)105804975Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Trade and Investment Risk IndexChina Trade and Investment Ri

27、sk Report | Q4 THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings credit ratings. Any comments or data included in the report are solely derived from FitchSolutions Macro Research and independent sources. Fitch Ratings analysts do not share data or i

28、nformation with Fitch Solutions Macro Research. 5Trade And Investment Risk SWOTSWOT AnalysisStrengthsChina has started to diversify its economy away from low-end manufacturing to become an economyfocused more on creating high-end, innovative products.Xi Jinpings government has started to aggressivel

29、y fight corruption, with a number of high-profile individualsbeing charged with hefty sentences, which sends a strong message to local and international businessesthat corruption will not be tolerated.The country operates a number of special economic zones in which state presence is minimised,encour

30、aging growth of FDI and private enterprise.WeaknessesA trade war betweenChina and the US is weakening Chinas trade flows and increasing global protectionismagainst it.Even though anti-corruption efforts have been stepped up, allegations of corruption in all levels ofgovernment still persist, increas

31、ing costs and risks of reputational damage for businesses.Press freedoms are significantly curtailed, hindering the reporting of corruption.OpportunitiesThe government is focusing on further opening up the economy to foreign investment, and easing limits oninvestment in banks and other financial ins

32、titutions.Corruption probes have been launched in order to increase transparency within government.China has diversified its export mix away from a reliance on the eurozone and US, reducing its vulnerability toexternal shocks.ThreatsFurther implementation of US tariffs could have a relatively large

33、impact on the Chinese economy due itsgreater reliance on exports.China may be in the midst of a long-term economic slowdown.The economy will face difficulty in continuing to increase its share of the global export market, and efforts tomove up the value chain will be fraught with problems.China Trad

34、e and Investment Risk Report | Q4 THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings credit ratings. Any comments or data included in the report are solely derived from FitchSolutions Macro Research and independent sources. Fitch Ratings analysts do

35、not share data or information with Fitch Solutions Macro Research. 6Economic Openness AnalysisKey View:China continues to have one of the highest trade volumes in the world; however, thetrade tensions with the US have weakened the countrys trade growth. Consequent heightened tariffs between thetwo s

36、uperpowers have further added to the burden of high labour costs in China, making it costly to operate in the country. This has led to many businesses, particularly in manufacturing, moving their production lines to alternative centres in the region, such as Vietnam and Cambodia.That said, an end to

37、 the trade tensions may be on the horizon as further tariff hikes have been delayed due to substantial progress in talks between the two sides. We are also seeing China move towardsliberalisation, withBeijing steppingup efforts to open up the domestic market to foreign players amid pressures from tr

38、ading partners. An adoption of a more consistent and transparent system for foreign investors is underway, as well as continued cutting of import tariffs (for partners other than the US) over the coming years. We also expect to see state-owned entity (SOE) reforms proceeding at a faster pacedue to a

39、 more reform-minded leadership, with the focus being on optimising the ownership structures of SOEs by encouraging private investment. However, full-scale privatisation is still not on the agenda.Consequently, we score China a moderate 48.7 out of 100 for Economic Openness, ranking the country 12th

40、out of 18 states in East and South East Asia.Potential End To Trade Tensions May Be On The Horizon East 0 = highest risk. Source: Fitch Solutions Trade and Investment Risk IndexLatest Economic Openness AnalysisPresident Donald Trump has announced that the US will impose a 10% tariff on USD300bn wort

41、h of Chinese imports, to come into effect on September 1 2019. With the US having already imposed a 25% tariff on USD250bn worth of Chinese goods, the latest announcements meanthat, effectively, all Chinese goods coming into the US will be subject to tariffs. According to Trump, the new tariffs are

42、a response to China failing to live up to its promises of buying more American agricultural goods, or stopping the export of fentanyl. That said, Trump has delayed imposing some of these tariffs on certain Chinese imports until December 15 2019, citing safety, health and national security reasons. T

43、hese products include mobile phones, laptops and video game consoles. Other items facing the 10% tariff will go ahead as originally scheduled for September 1 2019. Our Country Risk team is revising Chinas current account balance forecast for 2019 to 0.2% of GDP, from -0.3% of GDP previously. This is

44、 to reflect the slowdown in imports offsetting the lacklustre performance of exports following the onset, and re- escalation, of trade tensions. Travel and transport spending will also face downside pressure, reducing downward pressure on the current account. Belt and Road related capital outflows a

45、re also likely to slow, given Beijings efforts to diversify funding sourcesChina Trade and Investment Risk Report | Q4 THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings credit ratings. Any comments or data included in the report are solely derived from FitchSolutions Macro Research and independent sources. Fitch Ratings analysts do not share data or information wit