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 informed 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

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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...

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China Operational Risk Coverage (9)

China Operational Risk

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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 a number of legal, regulatory and bureaucratic obstacles inherent in the country's business environment. The sheer size of China's economy and population mean that it will remain an attractive market for foreign investors, as evidenced by the country boasting the largest foreign direct investment inflows of any developing country worldwide. Nevertheless, an uptick in indiscriminate terror attacks across the country and an ongoing slowdown following credit-fuelled economic expansion will continue to...

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China Crime & Security

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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 46.9 out of 100 placing the country 26th out of 38 states in Asia.

The most pertinent risks faced by foreigners in terms of crime are pick-pocketing, robbery and financial fraud. Reporting crimes to the police is made complicated by the lack of...

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China Labour Market

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BMI View: Although the labour market in China is tightly regulated with regards to contracting foreign workers and the rate of employer social security contributions, it remains the largest workforce in the world 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 21st century, and now produces the most university 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...

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China Logistics

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BMI View: China boasts an extensive and well-developed logistics network which has benefited 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...

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China Trade & Investment

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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 research and development 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 52.4 out of 100 for overall Trade and Investment Risk, placing the country 13th out of 38 states in Asia.

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China Industry Coverage (24)

Agribusiness

China Agribusiness

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BMI View: China's weight in the global agricultural sector is swelling, as the country has a growing impact on international production balances and prices. China will maintain a strong appetite for key commodities for the foreseeable future and we see particular potential for production growth in sugar, dairy and meat products. 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 experiencing challenging times, with GDP growth slowing down, consumers' trust in food safety dwindling, food...

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Autos

China Autos

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According to the China Association of Automobile Manufacturers, auto sales in June 2015 declined 2.3% y-o-y to 1,803,100 units, bringing sales for H115 to 11,854,900 units, an increase of 1.5% y-o-y. We have downgraded our 2015 sales growth forecast to 3.9% as a slowing economy coupled with the recent stock market collapse remain key headwinds to demand.

Besides these factors, we see auto demand taking a hit from the increasing number of cities placing restrictions on car sales to tackle their worsening air pollution and traffic problems. For instance, Shenzhen announced curbs on car sales in December 2014 and has capped the number of new cars sold in the city to 100,000 units a year. As more upper tier cities, which have traditionally been strong demand drivers, impose caps, automakers will have to accelerate their expansion in the country's less penetrated Western region to find new areas of growth.

After...

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Commercial Banking

China Commercial Banking

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

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Consumer Electronics

China Consumer Electronics

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BMI View: We downgraded the growth outlook for China's consumer electronics market in Q415 to reflect the slightly weaker economic outlook and the diminished growth prospects as a result of rapid rises in device penetration rate in several key categories such as smartphones, tablets and LCD/LED TV sets over recent years. As a result of relatively high device penetration rates in the context of China's GDP per capita, a product of the strong base of local manufactures right across the device spectrum, medium term growth will underperform the growth trajectory 2011-2014. Nonetheless the sheer scale of the market makes it central to vendor strategies and we believe there is scope for vendors to capitalise on economic trends to increase performance. For instance, broad based income growth and the boost from...

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Defence & Security

China Defence & Security

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BMI View: China has continued its assertion of dominance in the South China Sea over several incidents in the past year. This has raised tensions between its Asian neighbours as well as the U.S. and has even caused a standoff between militaries. Although China has begun to make political moves, deals and visits to ease these tensions, many speculate that these are more for show rather than sincere negotiations. Again, little is truly known about China's domestic situation due to its blockade against news leaving the country.

China's defensive position and plans are difficult to fully confirm due to China's secrecy on such matters. 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. China is one of the worlds largest spenders...

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Food & Drink

China Food & Drink

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BMI View: Over the next five years, China will see some of the fastest private consumption growth rates in Asia. We forecast average annual real private consumption growth of 8.0% over the next five years. This chimes with the rebalancing of the economy towards greater private consumption and will see growth in this area remain strong, despite our forecasts for a slowdown in the overall economy's real growth rate to below 7.0% over the coming years. While the outlook for China's traditional economic growth drivers such as heavy industry and real estate construction remains cloudy, the outlook facing more consumer-focussed industries is relatively strong over the medium term.

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Freight Transport

China Freight Transport

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BMI View: We expect China's freight transport sector to be insulated from the slowdown in the country's economy, largely as a result of its booming exports and outperforming private consumption. As a result we forecast steady growth across freight modes, in 2015 and over the medium term. Road should remain the most important mode on the back of China's continued manufacturing boom.

China's booming exports are expected to insulate freight volumes from the general slowdown in the economy. We still hold the view that China's economic growth in the coming decade will be much slower than in the last, as the savings rate falls, 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. However, its trade...

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Information Technology

China Information Technology

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BMI View: A minor downgrade to the IT market forecast in Q415 to reflect a slightly weaker economic outlook has not materially altered our view that China will continue to record strong IT spending growth and IT sector development. The supportive and forward-looking policy environment combines with market fundamentals to provide strong growth prospects resulting from the size of the population, rising incomes, relatively low penetration of devices and solutions and a supportive policy environment. IT spending growth...

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Infrastructure

China Infrastructure

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BMI View : China's construction sector is undergoing a structural slowdown as the country shifts from an investment driven model, which focused on fiscal stimulus measures targeting the infrastructure sector. Opportunities remain substantial, however, given the country's large infrastructure deficit and ongoing reforms to spur private investment and improve regional connectivity through its One Belt One Road initiative.

Key Trends And Developments

  • We believe China's construction sector will continue to see a structural slowdown over the coming quarters, as Beijing steers the economy towards a more consumption-led growth, as opposed to an investment driven one. We forecast the country's construction sector to grow by an annual average of 4.7...

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Insurance

China Insurance

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BMI View : China's insurance sector continues to stand out in global terms as one that is both extremely large by most metrics and rapidly growing. As is the case in South Korea, Hong Kong, Taiwan and Japan, life insurance plays a crucial role as a conduit of organised savings in a country where the population is ageing rapidly and where limited social security benefits are provided directly by the government. The ongoing growth and development of the economy should underpin a steady rise in volumes in the non-life segment. In some sub-sectors, price competition is expected to restrict premiums growth.

China's massive insurance sector has much in common with its peers in North East Asia. Life insurance has become a very...

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Medical Devices

China Medical Devices

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BMI Industry View: Despite a slowdown in some sectors, China remains one of the fastest growing medical 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, threaten to alter the risk-benefit profile of...

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Metals

China Metals

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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.

Boom Years...

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Mining

China Mining

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BMI View: Chinese mining consolidation will continue over the coming quarters due to weak global minerals prices and government supporting consolidation.

We expect China's mining sector to become increasingly consolidated in the coming quarters for the following reasons.

  • First, weak mineral prices will price-out high-cost producers. We believe weak mineral prices will continue to pressure Chinese high-cost producing miners over the coming quarters. 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 cut-back capital expenditures over the coming quarters.

  • Second, government-supported industry consolidation. Beijing's pledge to...

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Oil & Gas

China Oil & Gas

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BMI View: China's crude stockpiling will remain strong as new storage facilities come online, even though the domestic fuels demand however will moderate substantially in the coming years. On the upstream, CNPC's first major tight oil discovery on the Changqing field marks a milestone for Chinese technological capabilities as this is the first unconventional solo discovery by a Chinese NOC. Applying new technologies to unlock vast onshore (unconventional) and offshore (deepwater) resources is the most pertinent upside risk to our long-term oil and gas production...

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Petrochemicals

China Petrochemicals

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BMI View: A slowdown in Chinese demand will raise market self-sufficiency and reduce imports, according to BMI's latest China Petrochemicals Report. The Chinese petrochemicals market is faced with a rapidly cooling national property market, which has far-reaching consequences not only for plastics used in construction but to the wider economy. In line with the manufacturing slowdown, the automotive sector, which is among the main petrochemicals consuming industries, is set for lower growth.

China should meet its target of 64% self-sufficiency in ethylene and derivatives in 2015. A key element of this drive is coal-to-olefins technology, which has helped the country leverage its low-cost coal resources to boost feedstock security and competitiveness. As a result, most of its PVC output is now coal-based. Meanwhile, polypropylene and polyethylene import growth is...

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Pharmaceuticals & Healthcare

China Pharmaceuticals & Healthcare

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BMI View: The policy changes affecting China's pharmaceutical market will not deter the growth trajectory of local drugmakers. While competition has heightened due to the new tendering system, the system will remain more favourable to Chinese drugmakers as their product portfolios are focused on low cost generic drugs. In addition, their strength in the rural regions of China will become an advantage as the expansion of health insurance to cover chronic illnesses and the government's move to redirect patient flow to local facilities gives rise to strong commercial opportunities.

Headline Expenditure Projections

  • Pharmaceuticals: CNY608bn (USD99bn) in 2014 to CNY688bn (USD105bn) by 2015; +13.0% in local currency terms and +6.8% in USD terms. This is a downgrade from the previous...

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Power

China Power

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BMI View: Government efforts to diversify China's power mix away from coal in a bid to reduce pollution are gaining traction and we have revised our 10-year power generation and capacity forecasts accordingly. The implementation of policies to reduce coal generation, continued support for the renewables sector and a robust nuclear reactor pipeline underpin our outlook for the Chinese power sector over the coming decade.

In terms of fuel mix, conventional thermal sources play a key role and are expected to continue to dominate electricity generation as many projects under construction or planned will use coal or gas, and as Chinese efforts in prospecting and exploiting conventional oil and gas resources are set to increase. While other sources of power will play increasingly important roles, China will remain reliant on coal for its power generation over the next decade. Energy poverty...

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Real Estate

China Real Estate

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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 view...

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Renewables

China Renewables

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BMI View: We have upwardly revised our 10-year renewables capacity and generation forecasts for China this quarter, further cementing the country's position as the global leader for renewable energy. Incorporating renewable energy into the power mix is a top priority for the government and continued strong government support for both the wind and solar sectors is one of the key fundamentals underpinning our bullish view on the Chinese renewables market.

China led the world in terms of total investment into renewable energy in 2014, up 32% from the previous year, and we expect this trend to remain in place in 2015 and beyond. The country will continue to be the fastest growing and the largest market in terms of installed renewables capacity globally, as the government pushes to meet the country's growing power needs while reducing pollution.

  • In...

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Retail

China Retail

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BMI View: China is the biggest country in the world, and until recently it was also one of the fastest growing economies in the world, though there has been a slight economic slowdown for China. In spite of this, China still represents tremendous potential as more families reach middle income status and therefore have more disposable income to spend on aspirational goods. Shopping malls are becoming ubiquitous in China's main cities, but the almost uncontrolled development has led to some malls having almost no occupants.

Household spending is increasing, but like overall GDP growth it at a rate that is lower than previously predicted. Net household income will increase from USD15,675 in 2015 to USD21,145 in 2019 during our forecast period. This increase in average...

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Shipping

China Shipping

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BMI View: China will continue to be the most important market for global container shipping in 2015 and over the years to come. Although there are some risks to the export picture, we expect positive growth across the country's many major box ports, which dominate the global top 10. 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. This is good news for the country's container shipping sector, which should see a boost in volumes as a result....

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Telecommunications

China Telecommunications

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BMI View : Despite its size and ability to rapidly integrate new technology and solutions, the Chinese telecoms market's potential is undermined by the state's reluctance to relinquish control. Government directives concerning the accelerated development of the national broadband network, its licensing of an unsustainable number of MVNOs and influence over pricing potentially leave the industry unable to respond to negative changes in the macroeconomic arena.

Key Data

  • Mobile subscription growth has turned volatile, owing to a number of factors including inactive SIM disconnections, subscriber transfers to 3G/4G services, customers migrating to MVNOs and the slowing consumer spending. Growth will remain positive, reaching 1.417bn subscriptions at the end of 2019.

  • The...

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Tourism

China Tourism

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BMI View : Inbound and outbound travel to and from China are expected to see significant growth over our forecast period to 2019, with a combination of factors such as expanded travel connections, increases in private financial consumption and a relaxation of stringent visa requirements supporting growth of the tourism industry. We therefore forecast healthy growth across all key market indicators, including tourism related expenditure and hotel industry value.

China's tourism market, inbound and outbound, is one of the most dynamic on the global stage. The country offers a diverse range of tourism attractions from beach holidays to winter sports to cultural and historical excursions, ensuring it maintains a broad appeal to domestic and international travellers. As one of the largest tourism markets in the world, China is attracting...

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Water

China Water

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BMI View: This quarter we have extended our forecasts and revised our existing projections in order to include new historical data and take the additional figures into account. We now include extraction by source, non mains consumption, discharged wastewater and treated wastewater. Overall we have a positive outlook for the Chinese water services sector as the combination of vast domestic and soaring industrial water demands, in addition to government programmes to expand the sanitation sector and reduce pollution, ensure strong growth. Furthermore, given that infrastructure still lags behind demand, we view China as offering good potential for infrastructure companies.

The abrupt rise in population and urbanisation has not only stretched the energy infrastructure to its limits, but also put a strain on...

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