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

BMI View:

Core Views

  • We expect real GDP growth to continue to slow in 2016, and forecast it to fall to 6.3%, versus 6.9% in 2015. As the economy continues to work through its significant overcapacity issues, job losses in sectors ranging from coal mining to steel production could be significant. Meanwhile, trade accounts will continue to underperform versus previous years, with both exports and imports set to contract for a second straight year.

  • 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...

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 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...

China Crime & Security

BMI View:

BMI View: China's appeal as an investment destination is boosted by the relative absence of major security risks which threaten everyday business operations. Terrorist activity does occur, but it is largely confined to remote western regions, while crime rates in key cities are generally similar or lower than comparable urban areas in other countries. Interstate conflict is a greater concern, but China's considerable capacity for self defence deters any attack on the mainland. Organised crime poses some risk to business activities, largely through money laundering and the promotion of corrupt practices among law enforcement and the political elite. However, the primary concern for businesses in China is endemic cybercrime, against which the government does not provide adequate protection. The impact of cyberattacks on business operations, combined with China...

China Labour Market

BMI View:

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...

China Logistics

BMI View:

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...

China Trade & Investment

BMI View:

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 51.7 out of 100 for overall Trade and Investment Risk, placing the country 10th out of 35 states...

China Industry Coverage (32)

Agribusiness

China Agribusiness

BMI View:

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 its appetite for key commodities for the foreseeable future, with particular potential for production growth in sugar, dairy and livestock. High demand growth, strong government support and the potential for investment and consolidation in these industries will help them outperform in the coming years. However, the agribusiness sector is experiencing challenging times,...

Autos

China Autos

BMI View:

BMI View: We expect a rebound in auto sales in 2016 as the recent tax cut for the purchase of small cars helps to boost consumer sentiment and leads to a rise in sales. We forecast auto sales to grow 4.4% in 2016 to 24.3mn units.

Passenger Car Sales
(2013-19)
f = BMI forecast. Source: CAAM, BMI

Key Views

  • The ongoing rebalancing of the economy towards consumption rather investment-led growth will see the passenger car continuing to outperform CVs over 2016-19.

    ...

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

Consumer Electronics

China Consumer Electronics

BMI View:

BMI View: The forecast for China's consumer electronics devices market was negatively impacted by a revision in the assessment for the CNY/USD exchange rate in the Q216 update, with our Country Risk team now expected more extensive depreciation. While affected headline market value figures, depreciation and wider economic uncertainty does not change our positive medium term outlook that continues to be based on the migration of Chinese households up the income scale over the medium term. We believe this will help to offset the slowdown in volumes that results from increased market saturation, and will provide vendors with opportunities for selling a larger share of premium devices over the medium term, if the pitfall of overcapacity is avoided. The core scenario continues to be positive in the Q216 update, however we do recognise increased uncertainty and significant downside to demand...

Defence & Security

China Defence & Security

BMI View:

BMI View: China's defence industry and military are currently undergoing substantial changes on the back of President Xi Jingping's sweeping reform and modernisation agenda. The promotion of greater civil-military integration will spur military industrial innovation and expand the technological capabilities of the domestic defence sector; however, we note that this process will be slow, and that the country will continue to look to import more technologically advanced equipment throughout our forecast period. Owing to rising regional tensions emanating from the South and East China sea...

Food & Drink

China Food & Drink

BMI View:

BMI View: China will remain the most attractive consumer market globally despite the slowdown in its economy. Nonetheless, the period of easy growth is over as retail sales growth heads lower and consumers develop increasingly sophisticated tastes. Accounting for rising health consciousness, demand for innovative goods and the surging popularity of e-commerce will be essential to succeed in the country.

Food and Drink Spending
(2013-2020)
BMI/National Statistics
  • Over the next five years, the greatest...

Freight Transport

China Freight Transport

BMI View:

BMI View: The Chinese economic slowdown will continue and the impact of net imports of commodities will intensify, affecting the freight sector with weaker than previously expected commodities imports. Iron imports will remain depressed on the back of a weaker steel production. However, private consumption will continue to be robust, exports continue to decline but at a slower pace amid some signs of improving foreign demand supporting freight volumes. Road will continue to remain the most important freight mode, also helped by consumer demand. We maintain a below-consensus growth forecast for China, including a 5.9% real GDP expansion in 2016.

The slowdown in the Chinese economy will result in the GDP growth averaging 5.9% over the next decade as opposed to the 10.1% average seen over the past decade. The growth rate is at the slowest annual rate...

Information Technology

China Information Technology

BMI View:

BMI View: Data for 2015 and the forecast for 2016 were revised down in the Q216 update but our core scenario continues to be for an expanding Chinese IT market and local industry. Despite heightened uncertainty we expect a stronger growth trend in 2016 as the hardware market gains momentum and envisage a CAGR of 8.1% for 2016-2020 as a whole. A hard landing is a downside risk, but under our core scenario we envisage broad based income growth, enterprise modernisation, and government support for the IT industry, and particularly emerging technologies such as cloud computing and the internet of things will drive market expansion over the medium term. The overall outlook is positive but opportunities will not be distributed evenly and challenges for...

Infrastructure

China Infrastructure

BMI View:

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

  • China's construction sector will grow by an annual average of 4.7% between 2015 and 2019, a marked slowdown relative to the 9.3% registered 2010-2014. We have long held the view the sector will see an inevitable slowdown as Beijing steers the economy towards more consumption-led growth, as opposed to an...

Insurance

China Insurance

BMI View:

BMI View: China's insurance market continues to present enormous growth potential. Although the volumes of premiums written in both the life and non-life sector are high, actual rates of penetration and density remain low and coverage is limited, particularly in rural areas of the country where access to formal financial services is in many cases still underdeveloped. Household income rates continue to rise and while economic growth has slowed, China's economy remains one of the fastest growing globally, supporting our forecasts for healthy growth in insurance premiums. Other positive structural trends, such as an expanding and ageing workforce and strong rate of urbanisation also underpin strong growth forecasts.

Headline Insurance Forecasts (China 2013-2020)
...

Medical Devices

China Medical Devices

BMI View:

BMI View: While the market will still offer major potential, the high growth rates of the past decade are looking increasingly unsustainable, as economic growth slows and pricing pressures increase. Even so, the market will remain one of the most attractive in the Asia-Pacific region. We believe that multinationals with well established manufacturing and R&D operations in the country will be best placed to take advantage of future opportunities.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local...

Metals

China Metals

BMI View:

BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.

...
Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

China Metals

BMI View:

BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.

...
Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

China Metals

BMI View:

BMI View: Globally, iron ore prices will remain subdued due to weak demand growth in China and expanding output by major miners in Australia and Brazil. China will see output slow as the country's iron ore miners operate on the higher end of the global iron ore cost curve.

...
Global Iron Ore Forecast
2014 2015e 2016f 2017f 2018f

China Metals

BMI View:

BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

...
Global Nickel Forecasts
2013 2014 2015e

China Metals

BMI View:

BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

China Metals

BMI View:

BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.

BMI Gold Forecasts
2014 2015 2016f 2017f ...

China Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

China Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

...
Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

China Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

...
BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Mining

China Mining

BMI View:

BMI View: China's mining sector will continue to be pressurised by low mineral prices over the coming years. Government-led consolidation will support production growth by state-owned enterprises as smaller miners shut operations, however, depleting reserves, falling ore grades and the relatively short life span of domestic mines will further drive outward Chinese investment.

...
China Mining Industry Value
2015e 2016f 2017f

Oil & Gas

China Oil & Gas

BMI View:

BMI View: China's long-term crude oil and liquids output will remain on a firm downtrend as low oil prices slowdown exploration and render certain high-cost mature and unconventional plays uneconomic. Outlook is more positive for natural gas, as the government seeks to increase the share of gas in the total energy mix. This will prompt domestic firms to ramp-up gas output accordingly, ensuring that growth remains robust over the short-to-medium term. Crude demand will remain strong, driven by continued stockpiling activity, greater teapot imports and robust domestic demand for gasoline, jet fuel/kerosene and petrochemical feedstock, which will drive elevated run rates at existing refineries.

Headline Forecasts (China 2014-2020)
...

Petrochemicals

China Petrochemicals

BMI View:

BMI View: The Chinese petrochemicals industry was already witnessing a slowdown in H115, but the yuan devaluation and the stock market crash will have a significant effect on activity over the near term. The export boost gained through devaluation will be offset by slackening domestic demand and long-standing issues of over-capacity in some segments, particularly in the light of mounting environmental concerns, could result in project delays, lower capacity utilisation and potentially some plant closures.

China's economic troubles are set to cause multiple problems for the petrochemicals industry. The fall in the value of the yuan will saddle Chinese businesses with significant foreign-exchange losses at a time of rising debt burdens and slowing growth. Low global interest rates and tight domestic credit conditions have prompted Chinese firms to borrow from abroad and the yuan's...

Pharmaceuticals & Healthcare

China Pharmaceuticals & Healthcare

BMI View:

BMI View: Ongoing challenges facing multinational pharmaceutical firms in China will persist into 2016. This includes pricing pressures on off-patented pharmaceuticals, as authorities look to meet the unmet medical need in the country by expanding access to medicines while curbing rising healthcare costs. Long and uncertain drug approval times will also remain a factor impinging on sales growth, as time is needed for authorities to fully develop and implement regulatory reforms.

Headline Expenditure Projections

  • Pharmaceuticals: CNY687bn (USD109bn) in 2015 to CNY770bn (USD115bn) by 2016; +12% in local currency terms and +6% in USD terms.

  • Healthcare: CNY4,023bn (USD640bn) in 2015 to CNY4,628bn (USD686bn) in 2015; +13.5% in local currency and +11.2% in USD terms.

...

Power

China Power

BMI View:

BMI View: This quarter, we have upwardly revised our gas-fired power generation forecasts to take into account the gas pricing reform implemented by the government, which will see materially lower gas prices for the country's businesses and industrial users. In turn, this will serve to marginally reduce coal-fired generation in the power mix - in line with government efforts to curb coal use.

Headline Power Forecasts (China 2014-2020)
2014 2015f 2016f 2017f ...

Real Estate

China Real Estate

BMI View:

BMI View: China's property market is suffering from oversupply due to years of high levels of development. Rising demand is not sufficient to drive up rental rates. The government is restricting development activity in 2015 and 2016 in the retail sector with the aim of balancing supply and demand. E-commerce firms and foreign entrants to the markets are expected to be key drivers of demand.

China's real GDP growth has been falling since 2010 from a high of 10.6% to 6.7% in 2015 and is forecast to continue falling to 5.9% in 2016. BMI forecasts the growth in real GDP to remain at this level for the...

Renewables

China Renewables

BMI View:

BMI View: China's renewables capacity additions continue to soar, highlighting - not only the sheer scale of the market size - dwarfing all other markets globally - but also, the challenges facing the country in terms of integrating the renewables output into the grid system. Renewables capacity will increase by 92% between 2016 and 2025, and will necessitate significant investment into China's transmission and distribution network in order to support the expansion.

Renewables Headline Forecasts (China 2015-2021)
2015e 2016f 2017f ...

Retail

China Retail

BMI View:

BMI View: During a difficult 2015 for China, robust household income growth has been one of the few silver linings to the country's slowdown. This translates well into continued retail sales for the coming 2016 year, supported by rising incomes and strong employment. However, this will be a slight drop off from 2015 as the slowdown begins to take its toll. We expect private consumption growth to outperform the remainder of the economy and...

Shipping

China Shipping

BMI View:

BMI View: In 2016, China's shipping sector is poised to enjoy a healthy year and the country's ports once more dominate the global top 10, a scenario which is not set to change any time soon. The outperformer in y-o-y tonnage terms is set to be one of China's smaller ports, the port of Basuo with annual gains of 8.3%, while the country's two largest ports at Shanghai and Shenzen are pencilled in to register steady box and tonnage growth over the next 12 months. Growth is predicated on the fact that China will remain one of the world's most attractive consumer stories over the next five-to-ten years, underpinned by several structural...

Telecommunications

China Telecommunications

BMI View:

BMI View : China has officially entered the 4G era in 2015 with greater than anticipated subscriber growth. Large subscriber bases will provide ample room for operators to generate revenue and 4G subscriber growth has mainly been generated through the migration of existing 3G customers to LTE networks. Government efforts to invite private competition into the fixed and mobile sectors, as well as mandate the state-owned operators to reduce data prices and improve network speeds will be positive for growth in the Chinese telecoms market.

4G Subscription Growth Propels Mobile Market
China Mobile Market Forecasts
...

Tourism

China Tourism

BMI View:

BMI View: The outlook for China's tourism industry is very positive. As well as a huge domestic travel market, China is also attracting growing volumes of international visitors and extensive government investment in transport infrastructure means tourism is reaching the further reaches of the country, as well as established travel hubs. While there are some potential downside risks to our current forecasts, namely a sharper economic decline in the domestic economy along with regional political tensions, we continue to expect steady increases in tourism arrivals and tourism related expenditure between 2016 and 2020.

Key Forecasts (China 2013-2020)
2013e...

Water

China Water

BMI View:

BMI View: The abrupt rise in population and urbanisation has put a strain on Chinese water resources. China is using up water at an unsustainable rate, with many of the country's rivers having disappeared over the past few decades. Over-extraction is a huge issue and is particularly prevalent in the north, where water resources per capita are decreasing at an alarming rate. We therefore anticipate that over the longer term, desalination will account for a larger share of the country's total water supply mix. However, this will only be true of the wealthier coastal regions with large industrial hubs, as otherwise the cost-risks would outweigh demand requirements.

Headline Water Statistics
2012...

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