BASIC FACTS - Asian Exim Banks Forum



China: Brief ProfileNovember 20183390900318770BASIC FACTSLand area: 9,561,000 sq kmPopulation: 1.4 bn (2018; est)Language: ChineseCurrency: RenminbiGDP: US$ 13.4 trn (2018, est)Exports: US$ 2.4 trn (2018; est)Imports: US$ 2.0 trn (2018; est)Sovereign Rating: A+ (S&P’s)00BASIC FACTSLand area: 9,561,000 sq kmPopulation: 1.4 bn (2018; est)Language: ChineseCurrency: RenminbiGDP: US$ 13.4 trn (2018, est)Exports: US$ 2.4 trn (2018; est)Imports: US$ 2.0 trn (2018; est)Sovereign Rating: A+ (S&P’s)Domestic EconomyChina’s real GDP moderated in 2018 to an estimated 6.6% from 6.9% in the previous year, as a result of weakening domestic demand growth.In absolute terms, GDP of China is estimated at US$ 13.4 trillion in 2018, with a per capita GDP (at PPP) of US$ 18,010 (est).The average consumer price is estimated at 2.1% in 2018, increasing from 1.5% in 2017, as a result of increasing imported prices of hogs and soybean.Services sector dominated the economy, accounting for 52.2% of China’s GDP in 2017, followed by industry (39.5% of GDP) and agriculture sector (8.3%). Natural ResourcesChina is the largest producer and consumer of coal in the world. Apart from large coal reserves, it also has large reserves of most ferrous and non-ferrous minerals, particularly manganese, bauxite, magnesite ore, pyrite ore and potassium. China is world’s largest steel producer and it also produces more than 90 percent of global rare earth metals (a group of 17 elements used to produce catalytic converters, permanent magnets and battery cells).According to FAO, the total arable land as a percentage of total land area of China is 12.7% in 2016 (as per latest data available).Trade and External SectorChina’s exports are expected to pick up by 9.7% to reach an estimated US$ 2.4 trillion in 2018, as compared to US$ 2.2 trillion recorded in the preceding year, owing to a pickup in global demand.China’s imports also expected to pick up by 13.9% to US$ 2.0 trillion in 2018, compared to US$ 1.7 trillion recorded in 2017, largely caused by the increasing prices of commodities as well as improving global demand.Accordingly China’s trade surplus decreased marginally to an estimated US$ 448.7 billion in 2018, as compared to US$ 476.2 billion recorded a year ago.Electrical machinery and electronic equipment accounted for 26.4% of China’s total exports in 2017. Other principal exports in the same year were machinery and mechanical appliances (16.9% of total exports), articles of apparel and clothing accessories (6.4%), furniture, bedding and stuffed furnishing (3.9%), and optical, photographic, and medical instruments (3.1%). Major imports of China in 2017 included components of electrical and electronic equipment, accounting for 24.8% of China’s total imports in the year. Other principal imports in the same year were mineral fuels, mineral oils and products of their distillation (13.5% of total imports), machinery and mechanical appliances (9.2%), ores, slag and ash (6.9%), and optical, photographic, and medical instruments (5.3%). In 2017 USA accounted for 19% of China’s exports followed by Hong Kong (12.4%), Japan (6%), South Korea (4.5%) and Vietnam (3.2%). South Korea is the leading source of China’s imports, accounting for 9.6% of total imports in 2017. Other main sources of imports are Japan (9%), Taiwan (8.5%), USA (8.4%), and Germany (5.3%). China’s current account surplus narrowed to an estimated US$ 73.8 billion (0.6% of GDP) in 2018, from US$ 164.9 billion (1.4% of GDP) in 2017.FDI, Ease of Doing Business & Global CompetitivenessAccording to UNCTAD’s World Investment Report 2018, foreign direct investment (FDI) inflows to China increased to US$ 136.3 billion in 2017 from US$ 133.7 billion in 2016. As regards FDI outflows from China, it witnessed a moderation from US$ 196.1 billion in 2016 to US$ 124.6 billion in 2017.In Doing Business 2019 conducted by the World Bank, 190 economies across the world are ranked on their ease of doing business, from 1 to 190. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. China was ranked 46th in the ease of doing business. India stood at 77th in the same ranking. Out of the 25 East Asia and Pacific countries, China ranked 6th on ease of doing business parameter.According to World Economic Forum’s Global Competitiveness Index Ranking 2017-18, China was ranked 27 out of 137 countries. This Index measures the ability of a country to provide high levels of prosperity to its citizens based on the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. India stood at 40th position in the same ranking.Exchange rate, Reserves and External DebtThe currency of China is Renminbi (Rmb). The renminbi is expected to appreciate to Rmb 6.6: US$ 1 in 2018 from Rmb 6.8: US$ 1 in 2017.China's foreign exchange reserves are expected to moderate in 2018 to US$ 3 trillion in 2018, as compared to US$ 3.2 trillion in 2017. Reserves reflected an import cover of over 18 months.In 2018, the total external debt of China is estimated to increase to US$ 1,710.1 billion from US$ 1,578.4 billion recorded in 2017.Country Risk RatingInstitutional Investor, in its September 2016 rankings of 179 countries, placed China at 27th position, one rank down from its previous rank in March 2016. India was placed at 45th in the same ranking. (As per the latest data available).Euromoney, in its September 2018 rankings of 186 countries, placed China at 43rd position. India was placed at 53rd rank in the same ranking.Export Credit Guarantee Corporation of India Ltd. (ECGC) ranks countries in seven groups, A1, A2, B1, B2, C1, C2 and D, according to increasing order of risk. In its June 2018 rating of 237 countries, ECGC placed China in the A1 group of countries. India was also placed at A1 in the same ranking.Standard & Poor’s Sovereign Ratings as on October 2018 rated China as A+ (the obligor's capacity to meet its financial commitment on the obligation is strong, however, the obligations are susceptible to the adverse effects of changes in circumstances and economic conditions) with a ‘stable’ outlook. India was rated as BBB- (adverse economic conditions or changing circumstances are likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.) with a ‘stable’ outlook in the same period.Dun and Bradstreet’s (DB) Country Risk Indicator, October 2018 rated China as DB4b (moderate risk, which implies – significant uncertainty associated with expected returns, risk-averse customers are advised to protect against potential losses) with a ‘deteriorating’ outlook. The DB risk indicator is divided into seven bands (DB1 to DB7, in the increasing order of risk). Each band is further divided into quartiles (a-d, ranging low to high), except the DB7 band. India was placed in the DB4c (moderate risk) category, under the ‘stable’ trend.According to Organization for Economic Co-operation and Development (OECD) country risk classifications of June 2018, China was placed at category ‘2’. The OECD Country Risk Classification measures country credit risk, i.e. the likelihood that a country will service its external debt, on a scale of 0 -7 (where 0 is the lowest risk category and 7 is the highest). This index covers 201 countries. India is placed at category ‘3’.India-China Bilateral Trade and Investment Relations (i)Bilateral TradeIndia’s total trade (exports plus imports) with China increased by a robust 25.4% to US$ 89.6 billion in 2017-18 from US$ 71.5 billion in 2016-17. China is the fourth largest export destination of India, with a share of 4.4% in India’s total exports.India’s exports to China improved by a healthy 31.1% to US$ 13.3 billion in 2017-18 from US$ 10.2 billion in 2016-17. The exports of organic chemicals and copper and its articles more than doubled in 2017-18. Organic chemicals were India’s major export item to China, accounting for 15.8% of India’s total exports to China in 2017-18, followed by copper and articles (11.6%), mineral fuels, mineral oils and products of their distillation (11.3%), ores, slag and ash (9.4%) and cotton (7.5%).India’s imports from China, increased by 24.5% to US$ 76.3 billion in 2017-18 from US$ 61.3 billion in the previous year, mainly because of an increase in imports of machinery and mechanical appliances and electrical machinery and electronic equipment. With a share of 16.4% in India’s total imports, China is India’s largest source for imports.Electrical machinery and electronic equipment formed the major item imported from China, accounting for 37.6% of India’s total imports from China in 2017-18, followed by machinery and mechanical appliances (17.8%), organic chemicals (9.3%), plastic and articles (3.1%), and optical, photographic, and medical instruments (2.2%).Accordingly, India’s trade deficit with China widened in 2017-18, to US$ 62.9 billion from US$ 51.1 billion in the previous year.(ii) Investment relationsDuring April 1996 to August 2018, the cumulative approved Indian FDI in joint ventures (JV) and wholly owned subsidiaries (FDI outflow) to China stood at US$ 1.5 billion. During April 2000 to June 2018, cumulative FDI inflows in India from China stood at US$ 2.1 billion (0.5% of India’s total FDI inflows). Indian companies have invested mainly in manufacturing (pharmaceuticals, refractories, laminated tubes, auto-components, wind energy etc.), IT and IT-enabled services (including IT education, software solutions, and specific software products), trading and banking sector.Some of the prominent Indian companies in China include Ranbaxy, Orchid Pharmaceuticals, Dr. Reddy Laboratories, Aurobindo Pharma, NIIT, Bharat Forge, Infosys, TCS, Satyam Computers, APTECH, Orind Refractories, Essel Packaging, Suzlon Energy, Reliance Industries, KGK Diamonds, Sundaram Fasteners, Binani Cements etc.Indian banks in China include State Bank of India, Bank of India, Punjab National Bank, Canara Bank, ICICI Bank, Bank of Baroda, Allahabad Bank, UCO Bank, Indian Overseas Bank, Union Bank of India etc..Some of the Chinese companies present in India include State-owned companies like Sinosteel, Shougang International, Baoshan Iron & Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, SinoHydro Corporation. Chinese private sector companies in India include Huawei Technologies, ZTE, TCL, Haier, BBK Electronics Corporation etc.Major Chinese projects in India are in the field of infrastructure, construction, including roads and bridges, power projects, including EPC and also supply of heavy equipment. Industrial projects are mainly in the iron and steel sector, including boilers, turbines and pelletization plants, as well as telecommunications.(iii) Other Areas of CooperationIndia-China Joint Economic Group on Economic Relations and Trade, Science and Technology, a ministerial-level dialogue mechanism established in 1988 during the visit of former Prime Minister Rajiv Gandhi to China. The 8th JEG Meeting was held in Beijing on January 19, 2010.A Joint Study Group (JSG) was set up after former Prime Minister Vajpayee’s visit to China in June 2003 to examine the potential complementarities between the two countries in expanded trade and economic cooperation. As per its recommendation, a Joint Task Force (JTF) was set up to study the feasibility of an India-China Regional Trading Arrangement. JTF Report was completed in October 2007. There are also Joint Working Groups on Trade, Agriculture and energy. The two countries also cooperate in the WTO. On January 19 2010, China and India had signed a memorandum of understanding (MoU) to expand the trade and economic cooperation under 8th ministerial level meeting of the India-China joint economic group held in Beijing.India and China has an agreement for the avoidance of double taxation (DTAA) and prevention of fiscal evasion with respect to taxes on income. During the State visit of Chinese President Mr. Xi Jinping in September 2014, a total of 16 agreements were signed in various sectors including, commerce & trade, railways, space-cooperation, pharmaceuticals, audiovisual co-production, culture, establishment of industrial parks, sister-city arrangements etc. The two countries also signed a MoU to open an additional route for Kailash Mansarovar Yatra through Nathu La. China agreed to establish two Chinese Industrial Parks in India and expressed their intention to enhance Chinese investment in India.During Prime Minister Narendra Modi’s visit to China during May 2015, 24 agreements were signed on the government-to-government side, 26 MoUs on the business to-business side and two joint statements were signed, including one on climate change.Prime Minister Narendra Modi visited China in September 2016 to participate in the G20 Summit in Hangzhou and September 2017 to participate in the BRICS Summit in Xiamen, where he also held bilateral talks with President Xi Jinping. President Xi Jinping visited India in October 2016 to participate in the BRICS Summit in Goa. The two leaders also met along the side-lines of the SCO Heads of States Summit in Tashkent in June 2016 and in Astana in June 2017.Export-Import Bank of India (Exim Bank) and ChinaAs on June 30, 2018, Exim Bank has provided finance to 7 Indian companies for setting up ventures in China in sectors such as engineering goods, agro and food processing, metal processing and pharmaceuticals, among others, with sanctioned amount of Rs 267.2 crore. Companies supported include:Synthite Biotech Co. Ltd. - Agro & food processingAurobindo Pharma Limited - Drugs and Pharmaceuticals Sector Jiangsu Sterlite Tongguang Fiber co. Ltd - Engineering goodsRaman Boards - Engineering GoodsAnhui Reliable Steel Technology Company Ltd. - Metals & Metal ProcessingEverest Kanto Cylinder Ltd. - Plastics & PackagingEssel Packaging Limited - Plastics & PackagingDuring the 27th Commencement Day Annual Lecture of Exim Bank in Mumbai on July 27, 2011, the annual lecture was delivered by eminent Chinese academician, Professor Yu Yongding, who spoke on the topic “Rebalancing the Chinese Economy”. Prof. Yongding is an academician at the Chinese Academy of Social Sciences (CASS), the President of China Society of World Economics (since 2003) and the Editor-in-Chief, China and World Economy.With a view to enhance cooperation and forge a stronger linkage among its member institutions, the Asian Exim Bank’s Forum (AEBF), a grouping of Asian Exim Banks, was conceived and initiated by Exim Bank of India in 1996. Since 1996, the Forum meets every year at an Annual event hosted by Export Credit Agencies’ (ECA), in rotation. Members comprise ECAs from 5 ASEAN countries namely Indonesia, Malaysia, Philippines, Thailand, and Vietnam, along with Australia, China, India, Japan and Korea. Asian Development Bank is a Permanent Observer. The task of Asian Exim Bank Forum is to enhance cooperation and strengthen ties among its member institutions, thereby fostering a long-term relationship with the Asian ECA community. The Annual meetings serve as a forum for discussing a wide range of issues focused on fostering common understanding as well as exchanging and sharing information. Together, the endeavour is to meet the challenges faced as an export credit agency in Asia and explore possible areas for further regional cooperationMacroeconomic OutlookReal GDP growth of China is expected to slow down and grow at 6.2% in 2019 and 6.1% in 2020. The slowdown in growth is expected because of the US-China trade war and slowing domestic demand. Consumer price inflation is expected to average at 2.7% during 2019-23. This is because of firming food prices, and increased transportation costs as a result of increasing oil prices. US-China trade tensions pose an upside risk to the forecasted inflation levels. The renminbi is expected to depreciate to Rmb 7.0: US$1 in 2019, as compared to Rmb 6.6: US$ 1 in 2018 amid an anticipated tightening in US monetary policy and declining current account surplus. The current-account surplus will average the equivalent of 0.1% of GDP in 2019-23, falling from an average of 1.7% in 2014-18. Annual average growth in goods imports will outpace that in exports in the forecast period. China will enjoy success moving into higher-value added export sectors, offsetting its loss of price competitiveness in low-cost exports. China: Economic StructureEconomic Indicators20142015201620172018e2019f2020f??????GDP (US$ bn)10,53511,22611,22212,01513,39713,71215,160?Real GDP growth (%)7.36.96.76.96.66.26.1?Consumer price inflation (av., %)2.11.52.11.52.12.82.5?Population (bn)1.4e1.4e1.4e1.4e1.4e1.4e1.4e?Merchandise exports fob (US$ bn)2,243.82,142.81,989.52,216.52,430.72,491.12,650.1?Merchandise imports fob (US$ bn)1,808.71,566.61,500.61,740.31,982.02,053.52,187.0?Current account balance (US$ bn)236.0304.2202.2164.973.820.815.8?Total intnl. reserves (US$ bn)3,869.0 3,406.13,097.83,235.93,022.92,865.22,827.5?Total external debt (US$ bn)1,770.51,326.01,429.51,578.41,710.11,779.01,878.6?Average exchange rate (Rmb: US$)6.16.26.66.8 a6.67.06.8Local currency is RenminbiNote: e –Estimate; f- ForecastSource: EIU Country Report. ................
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