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
Japan – Quick Facts
127.8 million population
 Second largest economy
 GDP 1.8% 5-year compound annual
growth
 5.7% unemployment
 0.0% inflation
 FDI inflow $-6500.0 million

Strengths
Current account surplus
 Reduction of debt in banks and
companies
 R&D spending

Weaknesses
Ageing of population
 Social inequality
 Dependence on imports of raw materials
and food
 Low productivity of small companies

Insolvency Trends
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
China – Quick Facts
1.3 billion population
 3rd largest economy in the world
 Average GDP growth rate 11.1%
 Average per capita income annual growth
rate of more than 8%
 Unemployment 4%
 Inflation 4.8%
 FDI inflow $69.5 billion
 $585 billion US treasury securities vs Japan’s
$573 billion

Strengths
Competitive and diversified industry
 Foreign investments facilitate rapid
expansion
 Infrastructure development
 High corporate savings

Weaknesses
Inequality
 Environmental problems
 Weak banks
 Overcapacity

70
60
50
40
30
20
10
Investment / GDP (%)
Private Consumption / GDP (%)
Turkey
Brazil
Russia
India
China
0
Threat of Inflation?
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
China Overall Risk Assessment
Economic
Slowdown
in 2008
• 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
Recovery in to domestic demand
2009
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)
Conclusions
Economic growth of China will continue
in 2010
 Investment drives economic activity
 Foreign trade contributes positively

Japan suffers from recession
 Fall of corporate profits to their lowest
since 1983
