China 

China country policy

Policy established 03 May 2011

• The country ceiling is 2000 mln euro
• Early warning signal 1500 mln euro
• - of which was used as at 2011-08-31 233 mln euro

Country class: 2

Restrictions

• Extended DAL (Date of Ascertainment of Loss): 6 months

China country facts

Atradius Dutch State Business Economic Research
Country Report last updated 11 May 2011   
Country :  CHINA

Political Situation
Stable

Head of state
President and General Secretary of the CCP Hu Jintao; PM Wen Jiabao (since 15 March 2003).

Form of government
One-party state, ruled by Chinese Communist Party (CCP).

Member of
UN; IMF; IBRD; ADB; WTO.

Internal Economic Situation
Strong Economic Growth

General situation
Restrictive monetary policy and fewer incentive measures will result in slower economic growth. In 2010 economic growth was 10.3% and in 2011 this is expected to decelerate to 9.0% and in 2012 to 8.7%. Lower investment spending and export is responsible for the deceleration. Expected is that private consumption will contribute more to ec. growth due to higher salaries and government measures.  An economic growth of minimal 8% is generally considered to be sufficient to create enough jobs. Inflation increased to 3.2% in 2010 from a deflation of 0.7% in 2009. Higher food prices will result in increasing inflation this year (5.0%). Asset prices bubbles in property (especially in large cities). Due to the expansionary credit growth there are concerns about a deterioration of assets in the banking sector. Therefore government is urging banks to be more restrictive on lending. Reserve requirements for larger bank have been increased to 21%. The big four commercial banks dominate with a market share of 55% of the entire Chinese banking system. NPL in the banking sector is low (1.3%) but as lending has grown strongly this will in medium term result in higher NPL. 

External Economic Situation
Very Strong

Main sources of foreign exchange
machinery & equipment, clothing & garments, yarn and textiles.

Main foreign markets :  US (20%), Hong Kong (12%), Japan (8%), South Korea (5%), Germany (4%).

Main expenses of foreign exchange:
electrical machinery, petroleum and petroleum products, industrial machinery, textiles.
 

Balance of payments  
CA surplus remains large despite increasing imports. A large amount of the foreign exchange inflows is not direct related to trade or investments. Given the weaknesses in the financial sector the liberalisation of the capital account will be gradual.