China

Civil conflict, military losses, famines, and foreign occupation forced China to end its reign as an important civilization. The MAO Zedong Communist rule created an autocratic socialist form of government that limited people’s freedom. While strict political controls are still evident today, life has considerably improved, allowing people some personal freedom. With the 2008 Summer Olympics in Beijing approaching and China trying to promote itself as an open country, Prime Minister WEN Jiabao has issued a decree stating that the Chinese government will start releasing information, such as government budget or food safety, as long as it does not undermine the nation’s security or economic procedures; the decree is set to take effect May 1, 2008.

Main Airports

Beijing Capital International (PEK/BJS), Guangzhou Baiyun International (CAN), Shanghai Hongqiao (SHA)

U.S. Embassy

American Embassy Beijing Xiu Shui Bei Jie 3 Beijing 100600 People's Republic of China
Tel.: (86) (10) 6532-3831

Statistics

GDP: purchasing power parity:

$8.859 trillion (2005 est.)

GDP - real growth rate:

9.9% (official data) (2005 est.)

GDP - per capita: purchasing power parity:

6,800 (2005 est.)

Inflation rate (consumer prices):

1.8% (2005 est.)

Labor force:

791.4 million (2005 est.)

Exports:

$752.2 billion f.o.b. (2005 est.)

Exports - partners:

US 21.4%, Hong Kong 16.3%, Japan 11%, South Korea 4.6%, Germany 4.3% (2005)

Imports:

$631.8 billion f.o.b. (2005 est.)

Imports - partners:

Japan 15.2%, South Korea 11.6%, Taiwan 11.2%, US 7.4%, Germany 4.6% (2005)

Population:

1,313,973,713 (July 2006 est.)

Population growth rate:

0.59% (2006 est.)

Population Below Poverty Line:

10% (2001 est.)

Major Industries:

mining and ore processing, iron, steel, aluminum, and other metals, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizers; consumer products, including footwear, toys, and electronics; food processing; transportation equipment, including automobiles, rail cars and locomotives, ships, and aircraft; telecommunications equipment, commercial space launch vehicles, satellites

Employing Workers: 78*

Registering Property: 21*

Enforcing Contracts: 63*

Closing a Business: 75*

*2006 World Bank rank out of 175 countries

Starting a Business

The table below shows the number of steps and the amount of time needed to start a business, on average

Indicator	China	Region
Procedures (number)	13	8.2
Time (days)	35	46.3

China Risk Assessment

Country Rating

Rating: A3

Changes in generally good but somewhat volatile political and economic environment can affect corporate payment behaviour. A basically secure business environment can nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite acceptable on average.

Risk Assessment

Economic growth accelerated again in 2007 (up by 11.5%) spurred by strong investment. Officials have been concerned about the overcapacity in the car, steel, and construction industries, which could lead to tighter margins and financial difficulties, a risk already evidenced by a lengthening of payment times recorded by Coface. In view of the priority given to avoiding a catastrophic hard-landing scenario, monetary policy will remain strict, the moderate yuan appreciation will speed up slightly, and further administrative measures intended to cool off the economy appear likely. A gradual slowdown is therefore the most probable scenario. But even then, credit risk on companies continues to grow with the overcapacity suggesting that a shakeout will be unavoidable. Inflation accelerated in 2007 due mainly to rising food prices. The remedial measures taken — eight increases in mandatory bank reserves and five interest rate hikes — had only a limited impact last year. Monetary policy will thus tighten further in 2008.

Financially, despite the appreciable total amount of extra-budgetary commitments, sovereign risk has remained limited. Moreover, China's external position is still very solid, with foreign exchange reserves at record levels. The surplus liquidity generated by the large current account surplus and the massive influx of capitals end up in the stock market, with the Shanghai stock market index more than doubling in 2007. The very high price earning ratios prevalent in China compared to those in other Asian stock markets are indicative of an emerging speculative bubble. Volatility risk has thus been very high.

Politically, China remains stable with Hu Jintao re-elected as general secretary of the Chinese Communist Party. However, social tensions and inequalities between urban and rural areas represent serious risks. Nonetheless, in the short term, the government is likely to hold them in check. Governance moreover still presents major deficiencies. Recent measures to combat corruption have yet to contribute to a significant improvement in the business climate.

STRENGTHS

• Industrial competitiveness and diversification has benefited China's external accounts.
• Foreign investment has facilitated a progressive move upmarket.
• Infrastructure development, which has accelerated in the run-up to the 2008 Olympic Games in Beijing, will foster long-term growth.
• A very high corporate saving rate has financed most investment.
• The ascendancy of China on the international scene is a readily observable fact.

• Increasing inequality has stoked growing social tensions.
• Overcapacity poses a threat in several industrial and commercial sectors.
• Despite progress on prudential regulations and the arrival of foreign investors, Chinese banks are still weak amid strong growth of credit and uncertainty over the proportion of non-performing loans.
• Environmental problems constitute an obstacle to sustainable growth.
• The Taiwanese question remains a major risk factor.

• Agriculture
• Apparel
• Arts & Crafts
• Automobile
• Bags, Cases & Boxes
• Chemicals
• Computer Hardware & Software
• Construction & Real Estate
• Consumer Electronics
• Electrical & Electronics
• Energy & Environment
• Food & Beverage
• Furniture & Furnishing
• Health & Medicine
• Home Supplies
• Industrial Supplies
• Lights & Lighting
• Machinery
• Mineral & Materials
• Office Supplies
• Security & Protection
• Service
• Sports & Entertainment
• Telecommunications
• Textile
• Toys
• Transportation