China remains a hugely important investment destination for many of our clients. It is the most populous country in the world and the largest importer and exporter of goods. China is the largest recipient of foreign direct investment in the Asia-Pacific region, while a large number of the country's up-and-coming companies also invest enormously overseas. Our coverage – using our unique Total Analysis model – ensures that our clients make sound investment decisions in the country. We keep them abreast of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. They also benefit from in-depth analysis on 24 of China's most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our results-proven research teams. Our aim is for you, as our client, to feel totally at ease doing business in China.

Country Risk

China Country Risk

BMI View:

Core Views

  • As evidenced by strong rhetoric regarding its economic growth target in 2014, Beijing is likely to continue to implement targeted stimulus measures in order to avert a more acute economic slowdown. As a result of what we expect to be a balance between short-term stimulatory measures and longer-term economic reforms, we have upgraded our 2015 real GDP forecast to 6.7% from 6.0% previously. At the same time, we see the economy achieving a 7.3% rate of growth in 2014, versus our previous forecast of 7.1%.

  • The Chinese government's official investigation in Zhou Yongkang is a major split from past precedent, and will likely be the zenith of Xi Jinping's anti-corruption campaign. The campaign has also served as a purge to eliminate hostile political forces, and we believe that it will pave the way for Xi to enact more aggressive economic...

To read the full article Register for Free or Login

China Operational Risk Coverage (9)

China Operational Risk

BMI View:

BMI View: China's enormous domestic market and globally integrated supply chains will see the country continue to attract huge interest from foreign investors over the next five years, regardless of the rigidly regulated business environment. Nevertheless, an uptick in indiscriminate terror attacks across the country and a looming hard landing following credit-fuelled economic expansion will continue to cloud China's investment outlook.

The sheer size of China's economy and population mean that it will remain an attractive market for foreign investors, as is evidenced by the country boasting the largest foreign direct investment (FDI) inflows of any developing country worldwide. Nevertheless, we remain cautiously pessimistic in regard to the overall outlook for the Chinese economy over the next five...

To read the full article Register for Free or Login

China Crime & Security

BMI View:

BMI View: China poses considerable security risks for foreign business travellers, expatriates and tourists. The most salient problems for business operations in the country are street crime, cyber crime and indiscriminate terrorism (especially in Xinjiang Province). There is also a heightened risk of interstate conflict due to several ongoing territorial disputes with neighbouring countries. Consequently, China scores below the regional average in the BMI Crime and Security Risk Index, with 48.7 out of 100 placing the country 17th out of 29 states in Asia.

The most pertinent risks faced by foreigners in terms of crime is pick-pocketing, robbery and financial fraud. Reporting crimes to the police is made complicated by the lack of English-language skills on the part of the police and a reportedly inconsistent response. On...

To read the full article Register for Free or Login

China Labour Market

BMI View:

BMI View: Although the labour market in China is tightly regulated with regards to contracting foreign workers and employer contributions, it remains the largest work force on the planet and is set to remain so for the foreseeable future, despite the country's demographic decline. In addition, China has made rapid progression in terms of education provision since the beginning of the 21 st century, and now produces the most univer sity graduates in highly sought- after technical disciplines, which ultimately reduces the need for foreign investors to import labour in the first instance. As a result, BMI awards China a score of 53 .0 out of 100 for overall Labour Market Risk, placing the country 11...

To read the full article Register for Free or Login

China Logistics

BMI View:

BMI View: China boa s ts an extensive and well developed logistics network which has benefitted from significant investment in order to enable it to meet the demands of the country's rapid economic growth. There is good coverage of both utilities and transport infrastructure, with supply chains particularly gaining advantage from the quality of freight mode options and extensive maritime and air trade links. Although expansion of industry and trade volumes will be hindered by the economic slowdown, the demands of key economic sectors and supply chains will continue to place a strain on the logistics network. Consequently, the risk of disruption to business operations due to electricity and water shortages, road and port congestion, and workers strikes, will remain pertinent over the medium term. China nevertheless performs well...

To read the full article Register for Free or Login

China Trade & Investment

BMI View:

Foreign investors in China are able to take advantage of the country's huge domestic market, investment incentives in high value-added sectors and R&D expenditure, and relatively stable political environment. Nevertheless, corruption within business and politics remains pervasive in spite of targeted anti-corruption initiatives, and intellectual property protection remains weak. State-owned enterprises enjoy preferential treatment over foreign entities in areas such as credit allocation, taxation and legal protection. Taking these factors into consideration, BMI awards China a score of 48.2 out of 100 for overall Trade and Investment Risk, placing the country 13th out of 29 in Asia.

Although the Chinese government has openly declared that it welcomes foreign investment, the state maintains arbitrary restrictions on a number of key sectors in the economy. For instance, the government will not allow foreign...

To read the full article Register for Free or Login

China Industry Coverage (24)

Agribusiness

China Agribusiness

BMI View:

BMI View:   China's weight in the global agricultural sector is growing, as the country has an increasing impact on international production balances a nd prices. I n particular , w e highlight the growth potential for sugar, dairy and meat products as China maintains its strong appetite for key commodities. High demand growth, strong government support and potential for investment and consolidation in these industries will help them outperform in the coming years. However, the agribusiness sector is going through challenging times as GDP slow s , consu mer trust in food safety dwindles , food ingr ...

To read the full article Register for Free or Login

Autos

China Autos

BMI View:

Auto Sales

According to the China Association Of Automobile Manufacturers (CAAM), vehicle sales in June 2014 rose 5.2% year-on-year (y-o-y), to 1,845,800 units, bringing sales for H114 to 11,683,100 units, an increase of 8.4% y-o-y. It is important to note, however, that sales in June grew at the smallest y-o-y pace since March 2013 and were dragged down by the commercial vehicle (CV) segment, which contracted 19.7% y-o-y in the same month. While we are maintaining our passenger car sales forecast for 2014, we are downgrading our CV sales forecast due to the segment's poor performance year-to-date.

Economic Rebalancing Biting Into CV Demand

As fixed-asset investment slows and infrastructure spending cools (in part due to Beijing's reticence towards large-scale stimulus to prop up economic growth), it is only natural that demand for CVs will be hit...

To read the full article Register for Free or Login

Commercial Banking

China Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators 
Date Total assets* Client loans Bond portfolio Other Liabilities and capital* Capital Client deposits

To read the full article Register for Free or Login

Consumer Electronics

China Consumer Electronics

BMI View:

BMI View: Consumer electronics spending in China is forecast to continue strong growth as vendors make inroads in key categories such as smartphones and PCs to achieve strong volume growth. An additional boost is the package of economic and social reforms announced by the government in late 2013, which should boost consumption , which had been effected to some extent by the cessation of government subsidies in 2013 . We expect the market value will grow by 8.5 % in 2014 and we expect growth momentum will be maintained over the medium term...

To read the full article Register for Free or Login

Defence & Security

China Defence & Security

BMI View:

Like many aspects of its defence posture, China keeps its annual defence budget secret, nevertheless, it is possible to make an accurate estimate regarding what the country spends annually on defence. To this end, we expect China's defence budget to reach USD132bn in 2014. By 2018, we expect China's defence budget to reach USD187bn.

We have given China an overall security risk rating of 74 for Q414. On average, the country has scored an overall security risk rating at the same level for the period January 2009 until Q414. We believe China faces a low risk of becoming involved in a major interstate conflict. Similarly, it faces a low risk of experiencing a major terrorist attack, although its susceptibility to criminal activity remains high.

China's occasionally tempestuous relationship with India was tested once again in mid-August 2014 when Chinese troops entered territory claimed by India. The move follows similar...

To read the full article Register for Free or Login

Food & Drink

China Food & Drink

BMI View:

In China, we forecast private consumption to grow by an average of 8.1% out to 2018, as Beijing tries to re-balance the economy towards consumption and away from investment. Although this will be a very difficult balancing act, given that it could result in a sharp slowdown in overall growth, the Xi Jinping and Li Keqiang administration is somewhat more hawkish than previous leaders and will continue to press ahead with economic rebalancing. Important policies include raising minimum wages, liberalising the financial sector as well as the implementation of safety nets such as unemployment benefits and insurance.

Headline Industry Data

  • 2014 food consumption local currency = +9.7%; compound annual growth rate (CAGR) forecast between 2013 and 2018 = +9.3%.

  • 2014 beer volume sales = +8.9%; CAGR forecast between 2013 and 2018 = +8.7%.

  • ...

To read the full article Register for Free or Login

Freight Transport

China Freight Transport

BMI View:

BMI View: BMI maintains its cautious outlook for China's freight transport volumes for Q4 2014. We continue to believe that the hangover effects of China's economic stimulus are yet to be felt, and cooling credit growth is likely to reveal these effects over the coming quarters. Newfound reform momentum has the potential to help the economy grow out from under its credit excesses, however, several obstacles stand in the way of this, including the likelihood that reform efforts could exacerbate any economic downturn. We maintain our below-consensus forecast for China's real GDP growth of 7.1% in 2014 and 6.0% in 2015.

The outlook for China's traditional economic growth drivers, such as heavy industry and real estate construction, remains cloudy, and this will put downside pressure on freight volumes. The outlook facing the...

To read the full article Register for Free or Login

Information Technology

China Information Technology

BMI View:

BMI View: China continues to outperform in terms of IT spending growth and IT sector development. Despite rapid growth in the past decade the market remains attractive with strong growth prospects resulting from (inter alia) the size of population, rising incomes, relatively low market penetration and a supportive poli tical environment . IT spending growth in China is expected to outperform on a regional and global basis, with a CAGR of 9. 7 % forecast 2014-2018 as IT spending increases as a share of GDP...

To read the full article Register for Free or Login

Infrastructure

China Infrastructure

BMI View:

BMI View : The continued use of monetary and fiscal stimulus measures by the Chinese government at the expense of structural reforms suggests that near-term growth in China's infrastructure and construction sectors could be stronger than previously expected. That said, we still expect China's construction and infrastructure sectors to experience a structural slowdown over the long-term. The key reason for this outlook is because we believe that the basis for this increase in fixed asset investment is through the increase in liquidity in China's financial system, an unsustainable investment model due to the diminishing marginal return on expenditure.

Key Trends And Developments

  • Although the Chinese central government is increasingly aiming for economic growth to be driven by private consumption instead of fixed...

To read the full article Register for Free or Login

Insurance

China Insurance

BMI View:

BMI View : We expect growth in China's insurance sector to remain on an uptrend in the coming years due to the under-penetrated nature of the industry. However, increasing saturation in tier-one cities will push insurers to expand into lower tier cities. The ongoing liberalisation of the healthcare sector will unleash new growth opportunities within the health insurance sub-segment.

We forecast total gross premiums to slowdown in 2015 after growing by strong double-digit rates in 2014. We anticipate growth in premiums to come in at 5.5% (in USD terms) in 2015 versus 15.3% in 2014. The slowdown in the market is inevitable after strong double-digit expansion in each of the past three years. Furthermore, it is in line with our Country Risk team's view that the ongoing weakness in the Chinese economy will continue in the coming months, which will inevitably weigh on premiums.

...

To read the full article Register for Free or Login

Medical Devices

China Medical Devices

BMI View:

BMI Industry View: Despite a slowdown in some sectors , China remains one of the fastest growing medic al device markets in the world, which on the back of its   vast market size , offers huge potential to medical device companies .   However, the market environment is undergoing rapid change with a raft of new regulatory measures, which coupled with government incentives to develop local manufacturing and boost consumption of locally-produced products ,  ...

To read the full article Register for Free or Login

Metals

China Metals

BMI View:

BMI View:   China's metals industry is set to face   more pain ahead in the face of cooling Chinese economic growth and Beijing pledge to induce more supply discipline in heavy industry.

We expect China's metals industry to come under pressure from cooling Chinese economic growth over the coming years. More domestic smelters will struggle to survive in the face of falling profit margins, sluggish demand and waning support from the local governments. The rebalancing of China's economy away from fixed asset investment and towards private consumption will significantly drag on demand growth for construction-related materials. Industrial metals such as steel and nickel will be particularly affected given their heavy exposure to the construction sector.

...

To read the full article Register for Free or Login

Mining

China Mining

BMI View:

BMI View: More Chinese miners will cease operations over the coming quarters due to falling mineral prices and waning support from the local governments.

We expect more Chinese miners to come under pressure over the coming quarters due to falling mineral prices and Beijing's pledge to instil more supply discipline in heavy industry. While state-owned firms are generally more insulated from the weakness in commodity prices, the economic slowdown in China will diminish the financial resources of these firms, forcing them to preach greater austerity in the medium term.

China Slowdown To Drag On Mineral Prices
Select Commodity Prices (% chg y-o-y)
...

To read the full article Register for Free or Login

Oil & Gas

China Oil & Gas

BMI View:

BMI View: We have downgraded our consumption and production outlook in China this quarter owing to the following: slower economic growth and lower oil intensity in this growth, and lower government production targets influencing future energy consumption patterns. Nonetheless, it will remain a key market for oil and the fastest growing market for gas in the world. 

...
Headline Forecasts (China 2012-2018)
  2012 2013 2014f 2015f

To read the full article Register for Free or Login

Petrochemicals

China Petrochemicals

BMI View:

While Chinese petrochemicals output has grown in recent months, BMI's latest China Petrochemicals Report expects market conditions to worsen in key segments as the economy slows amid falling growth in consumer demand.

In the first seven months of 2014, ethylene output grew 6.2% year-on-year (y-o-y) to 9.96mn tonnes while plastics in primary forms rose 11.8% y-o-y to 39.74mn tonnes as the production of plastic products increased 8.5% to 41.78mn tonnes. This compares to an overall manufacturing growth rate of 9.9% over the January-July period. Meanwhile, Chinese Customs reports that in H114, polymer imports climbed around 11% from H113 to 8.63mn tonnes.

BMI believes much of the increase in petrochemicals and plastics output is attributed to rising capacity utilisation as new plants come on stream, although demand conditions also appear to be supportive of growth....

To read the full article Register for Free or Login

Pharmaceuticals & Healthcare

China Pharmaceuticals & Healthcare

BMI View:

BMI View:  A more 'rational' use of pharmaceuticals through pharmacoeconomics, and a crackdown on illegal rebates and corruption in China's pharmaceutical market could hinder the sector's growth potential. However, over the long term, the government is likely to improve its investment in healthcare in order to retain public support.

Headline Expenditure Projections

  • Pharmaceuticals: CNY532.4bn (US$86.6bn) in 2013 to CNY616.1bn (US$99.3bn) in 2014; +15.7% in local currency and +14.7% in US dollar terms. Forecast broadly unchanged from Q 3 13.

  • Healthcare: CNY3,230.8bn (US$525.4bn) in 2013 to CNY3,692.0bn (US$595.2bn) in 2014; +14.3% in local currency terms and +13....

To read the full article Register for Free or Login

Power

China Power

BMI View:

BMI View: China's power sector continues to be in a league of its own; and announcements by China Premier, Li Keqianq, that a series of large-scale power sector construction projects will be launched to 'stabilise growth and improve energy security' suggest that the sector will be benefit from China targeted stimulus approach. That said, with BMI 's Country Risk analysts anticipating that the Chinese economy is likely to slow down in the coming decade will be much slower than in the last, as the savings rate declines, the economic liberalisation process slows, and population growth falls. As such a slowdown in power demand appears to be on the cards. Meanwhile, the country is trying to ease its reliance on coal, focusing on cleaner forms of power generation. However, we still...

To read the full article Register for Free or Login

Real Estate

China Real Estate

BMI View:

BMI View:   Although we see Chinese economic growth slowing in the medium term, we are optimistic for the commercial property sector as a whole, as the maturing of the Chinese economy means that opportunities for new, premium developments remain plentiful. Reflecting this view, there is significant international interest in investing in Chinese commercial property.

We forecast a slowdown in Chinese economic growth, despite government stimulus measures, from 6.7% in 2015 and to under 6% by the end of our forecast period, in 2018. The government is treading a fine line between continuing with policies to stimulate investment with badly needed market reforms. The market is also being hit by a fall in residential real estate prices, with many predicting that the Chinese property bubble will burst. We do see prices continuing to fall, although in our...

To read the full article Register for Free or Login

Renewables

China Renewables

BMI View:

BMI View: We maintain a positive outlook on the non-hydropower renewable energy sector in China, and are leaving our forecasts unchanged. The country will continue to be the fastest growing and the largest market in terms of installed renewables capacity globally.

We have maintained our 2014 forecasts for non-hydropower renewable energy in China this quarter. We expect 12.2GW of solar capacity to come online in 2014, along with around 7GW of wind and biomass installations.

We have also maintained our medium- to long-term forecasts for solar capacity this quarter. At present, we forecast non-hydropower renewables generation capacity to grow by an average of 11.3% per annum between 2014 and 2023. We note that China will be the fastest growing and the largest market (in terms of total installed capacity) for renewable energy in the world for the foreseeable future. Here...

To read the full article Register for Free or Login

Retail

China Retail

BMI View:

BMI View: The Chinese retail sector is set to expand vigorously over the next few years as the country's growing and increasingly affluent population leads to a strong rise in household spending across all retail subsectors. We are particularly positive about the future growth prospects for communications and furnishing & home spending, with clothing & footwear also set to grow strongly; however, we expect the highest proportion of the household budget to be spent on food and drink throughout our forecast period.

The latest China retail report provides an extensive and comprehensive forecast of various retail indicators including household spending and headline total spending across each retail subsector, household income and employment forecasts, demographic forecasts and a detailed breakdown of household and per capita spending across a large number of retail areas including food...

To read the full article Register for Free or Login

Shipping

China Shipping

BMI View:

BMI View: We maintain our cautious view for China's shipping sector. China's economic growth in the coming decade will be much slower than in the last, as the savings rate declines, the economic liberalisation process slows, and population growth falls. These dynamics will result in real GDP growth averaging 6.0% over the next decade as opposed to the 10.1% average seen over the past decade. Private consumption will be a major outperformer, averaging growth of 8.1% and rising in importance as a share of GDP. As a result, while the outlook for China's traditional economic growth drivers such as heavy industry and real estate construction remains cloudy, the outlook facing the more consumer-focussed industries is relatively strong over the medium term.

After a decade-long cycle of high commodities prices partly boosted by stellar demand growth in China, the ongoing slowdown of the country's...

To read the full article Register for Free or Login

Telecommunications

China Telecommunications

BMI View:

BMI View : The attractiveness of the Chinese telecommunications market rests on the size of the population and the growing interest in data services. 3G growth drives the mobile market and 4G is taking off quickly. The creation of a national infrastructure company will help rural growth for china Unicom and China Telecom, putting China Mobile at a greater disadvantage. Increased price competition through the introduction of MVNOs will weigh on ARPUs in addition to rate reductions earlier in the year. These moves give the sugge stion of an open market, but developments are still closely controlled by the government and the MIIT. However, a focus on development of internet access through t he 'Broadband China' strategy roadmap ,...

To read the full article Register for Free or Login

Tourism

China Tourism

BMI View:

BMI View : China's tourism market offers enormous potential for growth, with a wide range of attractions drawing in visitors while domestic economic growth provides for one of the biggest outbound travel markets in the world. The BMI   China Tourism report examines expected growth trends across key market indicators throughout the forecast period to 2018, including increasing industry value and the expansion of the hotel sector.

China is maintaining its position as one of the most popular tourism destinations in the world. The country is home to a wide range of attractions, including an impressive 47 UNESCO World Heritage Sites (only Italy has more) and over 2,500 nature reserves. Attractions include the Forbidden City,...

To read the full article Register for Free or Login

Water

China Water

BMI View:

BMI View:   The ongoing widespread water pollution issues, in conjunction with the rising threat of long term water shortages due to rapid population growth, means that a vast amount of investment is needed in the water sector to expand and modernise the water wastewater and sanitation infrastructure. This will open up numerous opportunities to water management and water infrastructure groups.

The abrupt rise in population and urbanisation has put a strain on water resources. Domestic urbanisation, rapid industrialisation and the wide-spread construction of hydropower plants for electricity generation are using up China's water resources at a faster rate than could be replenished, aggravating droughts that have taken place throughout China. According to data from the Asian Development Bank, more than 400 Chinese cities are facing water shortages, with an average daily...

To read the full article Register for Free or Login