MIRA INFORM REPORT
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RATING
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STATUS
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PROPOSED CREDIT LINE
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<10
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C
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Absolute credit risk exists. Caution needed to be exercised
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Credit not
recommended
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Status :
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No trace
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Payment
Behaviour :
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---
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Litigation :
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---
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NOTES:
Any query related to this report can be made
on e-mail: infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – June 30th, 2012
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Country Name
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Previous Rating
(31.03.2012)
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Current Rating
(30.06.2012)
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China
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A2
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A2
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Risk Category
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ECGC
Classification
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Insignificant
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A1
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Low
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A2
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Moderate
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B1
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High
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B2
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Very High
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C1
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Restricted
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C2
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Off-credit
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D
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china - ECONOMIC OVERVIEW
Since the late 1970s China
has moved from a closed, centrally planned system to a more market-oriented one
that plays a major global role - in 2010 China became the world's largest
exporter. Reforms began with the phasing out of collectivized agriculture, and
expanded to include the gradual liberalization of prices, fiscal
decentralization, increased autonomy for state enterprises, creation of a
diversified banking system, development of stock markets, rapid growth of the private
sector, and opening to foreign trade and investment. China has implemented reforms in a
gradualist fashion. In recent years, China has renewed its support for
state-owned enterprises in sectors it considers important to "economic
security," explicitly looking to foster globally competitive national
champions. After keeping its currency tightly linked to the US dollar for
years, in July 2005 China
revalued its currency by 2.1% against the US dollar and moved to an exchange
rate system that references a basket of currencies. From mid 2005 to late 2008
cumulative appreciation of the renminbi against the US dollar was more than
20%, but the exchange rate remained virtually pegged to the dollar from the
onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual
appreciation. The restructuring of the economy and resulting efficiency gains
have contributed to a more than tenfold increase in GDP since 1978. Measured on
a purchasing power parity (PPP) basis that adjusts for price differences, China in 2010 stood as the second-largest
economy in the world after the US,
having surpassed Japan
in 2001. The dollar values of China's
agricultural and industrial output each exceed those of the US; China
is second to the US
in the value of services it produces. Still, per capita income is below the
world average. The Chinese government faces numerous economic challenges,
including: (a) reducing its high domestic savings rate and correspondingly low
domestic demand; (b) sustaining adequate job growth for tens of millions of
migrants and new entrants to the work force; (c) reducing corruption and other
economic crimes; and (d) containing environmental damage and social strife
related to the economy's rapid transformation. Economic development has
progressed further in coastal provinces than in the interior, and by 2011 more
than 250 million migrant workers and their dependents had relocated to urban
areas to find work. One consequence of population control policy is that China is now
one of the most rapidly aging countries in the world. Deterioration in the
environment - notably air pollution, soil erosion, and the steady fall of the
water table, especially in the North - is another long-term problem. China continues
to lose arable land because of erosion and economic development. The Chinese
government is seeking to add energy production capacity from sources other than
coal and oil, focusing on nuclear and alternative energy development. In
2010-11, China
faced high inflation resulting largely from its credit-fueled stimulus program.
Some tightening measures appear to have controlled inflation, but GDP growth
consequently slowed to near 9% for 2011. An economic slowdown in Europe is expected to further drag Chinese growth in
2012. Debt overhang from the stimulus program, particularly among local
governments, and a property price bubble challenge policy makers currently. The
government's 12th Five-Year Plan, adopted in March 2011, emphasizes continued
economic reforms and the need to increase domestic consumption in order to make
the economy less dependent on exports in the future. However, China has made
only marginal progress toward these rebalancing goals.
General Observations
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