Transcript Slajd 1 - Knowledge Resource Repository

Eliza Bogucka
Magdalena Mirek
Dominika Dunin - Szpotańska
COUNTRY RISK ASSESSMENT
China & Japan
AGENDA

Introduction

Theory according to financial risk

Case study: China

Case study: Japan

Conclusions
Financial Risk
Financial risk can be defined as the possibility of losing
money or not receiving the whole amount invested in
particular project. (It may be investing in stocks, bonds,
treasury bills, diverse sets of portfolio, etc.)
Types of Risk

political risk

exchange risk

inflation risk,

interest rate risk
What we consider when assessing risk
Firm-Specific Risks
Country-Specific Risks
Transfer Risk
Cultural and
Institutional Risk
Government risks
Blocked funds
Global-Specific
Risks
Ownership structure
Human resouce norms
Religious heritage
Nepotism and corruption
Intellectual property rights
Protectionism
Terrorism and war
Anti-globalisation
Environmental
Poverty
Cyberattacks
We will focus on…
Country
Rating
(Coface)
GCI index
HDI
Economic
Freedom
Quick Facts
CHINA
JAPAN

1.3 billion population

127.8 million population

3rd largest economy in the world

2nd largest economy

Average GDP growth rate 11.1%


Average per capita income annual
growth rate of more than 8%
GDP 1.8% 5-year compound
annual growth

Unemployment 4%

Unemployment 5.7%

Inflation 4.8%

Inflation 0.0%

FDI inflow $69.5 billion

FDI inflow $-6500.0 million
Emerging countries - resistance to the
US slowdown
Word Grow th GDP (m arket exrates), %
Em erging Countries GDP Grow th, %
10
8
6
4
2
2008 p
2007
2006
2005
2004
2003
0
Global Competitiveness Index
The set of institutions, policies, and factors that determine the
level of productivity of a country.
Years
China’s Rank China’s Score Japan’s Rank
(of 133)
(1-7)
(of 133)
Japan’s
Score (1-7)
GCI 2009–
2010
29
4.7
8
5,4
GCI 2008–
2009
30
4.7
9
5.4
GCI 2007–
2008
34
4.6
8
5.4
Economic Freedom
China – 132nd in the
world
Japan – 19th in the
world
Human Development Index
Measure of life expectancy, literacy, education, and
standards of living.
China 92nd rank
(developing)
Japan 10th rank (very
high)
Country & Business Climate Rating
China
• Country Rating A3
• Business Climate Rating B
Japan
• Country Rating A2
• Business Climate Rating A1
Strengths and Weaknesses
Strengths
• Competitive and diversified
industry
CHINA
CHINA
• Foreign investments facilitate
rapid expansion
• Infrastructure development
Weaknesses
• Inequality
• Environmental problems
• Weak banks
• Overcapacity
• High corporate savings
JAPAN
• Current account surplus
• Ageing of population
•Reduction of debt in banks
and companies
• Social inequality
• R&D spending
•Dependence on imports of
raw materials and food
•Low productivity of small
companies
China Overall Risk Assessment
Economic
Slowdown
in 2008
Recovery in
2009
• slowdown of exports and domestic demand
• falling demand from industrialised countries
• reduced investment
• expansionary monetary policy
• GDP growth in Q2 2009,reached 7.9% due to
domestic demand
Japan Overall Risk Assessment
Fall of economic growth in 2009 –
decline in exports and investments
Decline in household consumption
and disposable income
Rise of unemployment
Fiscal deficit (-6.7% of GDP) and
public debt (185% of GDP)
Conclusion – Invest in China!
China:




Japan:
Economic growth of
China will continue in
2010
Investment drives
economic activity

Japan suffers from
recession

Foreign trade
contributes positively
Absent inflationary
pressures

Fall of corporate profits
to their lowest since
1983
Decreasing exports

Negative inflation until
2011