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

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 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...

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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 48.7 out of 100 placing the country 18th out of 30 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...

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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 employer contributions, it remains the largest workforce 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 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, BMI awards China a score of 52.1 out of 100 for overall Labour Market Risk, placing the country...

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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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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 52.3 out of 100 for overall Trade and Investment Risk, placing the country 11th out of 30 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...

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China Industry Coverage (24)

Agribusiness

China Agribusiness

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Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)

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,...

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Autos

China Autos

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According to the China Association of Automobile Manufacturers, auto sales in 2014 came in at 23,491,900 units, an increase of 6.9%. While certainly impressive compared with the growth rates of other auto markets such as the BRICS, growth slowed from the 13.9% increase in 2013. For 2015, we forecast sales growth to continue slowing as the Chinese economy weakens and, at the same time, we expect the divergence in passenger car and commercial vehicle sales to endure.

We forecast auto sales growth to further slow in 2015 to 5.7%. As the accompanying chart highlights, growth in vehicle sales has been trending lower over the past two years in line with the slowdown in economic growth. With our Country Risk team expecting GDP growth to slow to 6.7% in 2015 compared with 7.3% in 2014, it's reasonable to assume that economic headwinds will weigh on auto sales over the course of the year.

While the electric vehicle (EV)...

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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

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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Over the next five years, we see three trends in private consumption for the major emerging markets in Asia. China will see some of the fastest growth rates in the region. We forecast average annual real private consumption growth of 8.0% over the next five years. These high growth rates chime with the rebalancing of the economy towards greater private consumption and, as such, will see private consumption growth 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 the more consumer-focussed industries is relatively strong over the medium term. Overall, though, as the traditional sectors remain the dominant drivers of the economy, we remain below consensus in our real GDP growth outlook, and caution...

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Freight Transport

China Freight Transport

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BMI View: We maintain our cautious view on 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. This is good news for the country's freight transport sector, which should see a boost in volumes as a result.

China will see the fastest growth rates in the region for private consumption. We forecast average annual real private consumption growth of 8.0...

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Information Technology

China Information Technology

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BMI View: China continues to outperform in terms of IT spending growth and IT sector development due to a mix of economic strength and a forward-looking policy environment. Even after 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 penetration of devices and solutions and a supportive policy environment. IT spending growth in China is expected to outperform on a regional and global basis, with a CAGR of...

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Infrastructure

China Infrastructure

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BMI View : Beijing's acceptance of a 'new normal' growth reinforces our view that China's infrastructure sector will continue to face a structural slowdown. Nonetheless, China remains an attractive market, as the government's 'Belt and Road' initiative provides opportunities for transport elated projects being available. Efforts to reform the sector and attract private sector funding also bodes well for the sector.

Key Trends And Developments

  • In line with our outlook of a gradual slowdown in China's construction industry, Beijing's acceptance of a slower GDP growth of around 7% as the 'new normal' reinforces our view. We forecast the construction industry to grow by 6.3% in 2015, a slowdown from 6.8% in 2014.

  • ...

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Insurance

China Insurance

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BMI View : China's insurance sector is, in terms of many metrics, one of the world's largest and fastest growing. One major driver of the expansion of both segments over the coming years is the ongoing growth of the economy, notwithstanding that the pace of expansion has moderated. Another is the liberalisation of the segment. Changes announced by the regulator - the CIRC - are strengthening the insurers and giving them greater scope to innovate. Demographic changes will boost the demand for annuities (and other offerings) from the life insurers. Although competitive pressures will limit the growth in motor vehicle insurance, other lines will develop quite quickly.

In the short term, the development of premiums in USD terms will be held back by the anticipated softness of the CNY. For some players in China&#...

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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...

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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: Although China will remain a major market for oil and gas, we note that opportunities will slowly reduce as the country's oil consumption growth slows. Gas opportunities, especially in LNG, will be limited by large long-term pipeline deals. Low oil prices will also slow crude oil production, though gas price reforms will help cushion some of this blow on gas output.

Headline Forecasts (China 2013-2019)
2013 2014e 2015f 2016f ...

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Petrochemicals

China Petrochemicals

Pharmaceuticals & Healthcare

China Pharmaceuticals & Healthcare

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BMI View: Pharmaceutical sales in China will continue to grow robustly - boosted by the improvement in healthcare access, liberalisation of the industry as well as an epidemiological transition towards chronic diseases. This will present strong revenue earning opportunities for both domestic and multinational pharmaceutical companies. However, downside risks to this upbeat outlook remain as the government will face pressures to contain medicine costs.

Headline Expenditure Projections

  • Pharmaceuticals: CNY608.45bn (USD98.75bn) in 2014 to CNY686.69bn (USD110.26bn) by 2015; +12.9% in local currency terms and +11.7% in USD terms.

  • Healthcare: CNY3,729.07bn (USD605.22bn) in 2014 to CNY4,276.73bn (USD686.72bn) in 2015; +14.7% in local currency and +13.5% in USD...

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Power

China Power

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BMI View: This quarter we have extended our forecasts to 2024. This notwithstanding we maintain our outlook for the power sector and we expect growth in electricity generation and consumption to slowdown in 2015. In terms of electricity generation, we expect China to continues to lead in total investment into renewable energy globally in 2015 and beyond, as the government pushes to meet the country's growing power needs, while reducing pollution We note, however, that these new power projects are generally not as scale...

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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: The Chinese government's commitment to expanding its domestic renewable industry has so far been unwavering, as evidenced by the numerous positive regulations and target revisions that occurred over the course of 2014 The pipeline for solar projects is particularly large and attractive solar module prices are supporting growth. We estimate that over 11GW of solar capacity went online during 2014 and we expect similar installation rates over 2015.

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...

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Retail

China Retail

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BMI View: The pace of growth in the Chinese economy has continued to slow over the past year; however we remain optimistic that household spending will grow strongly. Supported by monetary and fiscal stimulus measures, many Chinese households will be largely protected from the ongoing slowdown with the majority of spending focused on food & non-alcoholic drinks, clothing & footwear, transport and housing & utilities. Together, these four retail sub-sectors represent 55% of total household expenditure.

Concerns remain over China's current economic slowdown and how it may impact key sectors such as the retail market, which has seen dramatic growth on...

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Shipping

China Shipping

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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. This is good news for the country's container shipping sector, which should see a boost in volumes as a result.

China will see the fastest growth rates in the region for private consumption. Indeed, we forecast average annual real private consumption growth of 8.0%, over the next five years. These high growth rates chime with the rebalancing of...

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Telecommunications

China Telecommunications

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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 mobile virtual network operators (MVNOs) will weigh on average revenue per user (ARPU), ...

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Tourism

China Tourism

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BMI View : China's tourism market is exceptionally strong, benefiting from one of the largest potential outbound travel sectors in the world. Both inbound arrivals and outbound departures are expected to increase steadily throughout our forecast period to 2019, and the country continues to attract a range of foreign investors keen to take advantage of the high growth potential in the tourism industry. As a result, we expect to see healthy growth across all of our key market indicators including industry value and tourism related expenditure.

An ongoing process of global marketing campaigns alongside an increase in regional and global travel connections and gradual visa relaxation is boosting China's...

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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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