China 

China country policy

Policy established 21 April 2010

• ILC, bank guarantee or central public guarantee (conditional)
• The country ceiling is 2000 mln euro
• Early warning signal 1500 mln euro
• - of which was used as at 2010-07-31 418 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 8 March 2010   
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).

Internal Economic Situation
Strong Economic Recovery

General situation
Very loose credit policy and a very strong rise in public spending resulted in a strong economic rebound. Economic growth was 8.7% in 2009 and is expected to accelerate to 9.6% in 2010. Mainly high investment spending is responsible for the surge in economic activity. An economic growth of minimal 8% is generally considered to be sufficient to create enough jobs. Deflation in 2009 (0.6%) will turn into inflation of 3.1% this year as loose monetary policy will result in higher inflation figures. Asset prices bubbles are emerging in property (especially in large cities) and shares. Therefore government is urging banks to be more restrictive on lending. The big four commercial banks dominate with a market share of 55% of the entire Chinese banking system. NPL in the banking sector is declining, 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 (18%), Hong Kong (13%), 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 in 2009 despite drop in export. A large amount of the foreign exchange inflows is not direct related to trade or investments. What causes the concern for inflows of hot money, what the government tries to limit. Given the weaknesses in the financial sector the liberalisation of the capital account will be gradual.