General

Recently, the Institute of World Economics and Politics of the Chinese Academy of Social Sciences/International Investment Research Office of the National Global Strategy Think Tank released the 2021 China Overseas Investment National Risk Rating Report.

From the perspective of overseas investment of Chinese companies and sovereign wealth, the report has constructed 42 sub-indicators in five categories: economic foundation, solvency, social resilience, political risk, and relations with China, covering more than 90% of China’s overseas investment flows (not 114 sample countries (including tax havens) to comprehensively quantify and evaluate the risks faced by China’s overseas investment.

The 2021 "Report" provides three special reports on investment risks in countries along the "Belt and Road", investment risks in the RCEP region, new crown pneumonia epidemic and investment risks.

The new crown pneumonia epidemic has not changed the general pattern of overseas investment country risk rankings

The report’s risk rating results show that Germany is the country with the lowest risk and the highest rating in the overall ranking, and ranks in the top ten of the report with nine countries including Switzerland, South Korea, New Zealand, Denmark, Sweden, the Netherlands, Norway, Singapore, and Finland. .

Countries such as Australia, the United States and the United Kingdom have fallen more in rankings. In particular, Australia's debt solvency and relations with China have dropped significantly, resulting in a drop of 12 places in the overall ranking.

In addition to the decline in debt solvency in the United States and the United Kingdom, political risk scores have also declined, resulting in a drop of 8 and 7 places in the overall rankings.

Most countries along the “Belt and Road” are at medium risk, and their relations with China score significantly higher than the overall level.

The new crown pneumonia epidemic has not changed the general pattern of China's overseas investment country risk rankings.

On the whole, countries with lower investment risks, represented by developed countries, have suffered relatively severe epidemics; emerging market countries have experienced increased exchange rate volatility and increased debt, and other economic vulnerabilities have become more apparent in the epidemic.

Investment in RCEP member countries is less risky

The risk rating of RCEP member states in the report includes 13 RCEP member states, namely South Korea, New Zealand, Singapore, Australia, Japan, Indonesia, Malaysia, Cambodia, Laos, Vietnam, Philippines, Thailand and Myanmar.

The results of the report show that, except for South Korea, New Zealand, Singapore and Australia, which are low-risk countries (from AAA to AA), most of the ratings of RCEP member countries are at the medium risk level (from A to BBB). The top three countries with low to high risk ratings are South Korea, New Zealand and Singapore.

The report pointed out that overall, compared with most other countries and regions, the risk of investing in RCEP member states is lower. RCEP member countries have a good economic foundation, which can provide a certain degree of economic guarantee for the income level and safety of Chinese companies' overseas investments.

Most RCEP member countries have relatively good relations with China and relatively stable social flexibility.

In terms of overall country risk rating scores, the average national risk rating scores of RCEP member countries are higher than the average overall country risk rating scores.

In terms of economic foundation scores, the economic foundation of RCEP member countries is better than the average level of overall national economic foundation. As of the end of 2019, the economic aggregates of the ten ASEAN countries were second only to the United States, China, Japan and Germany.

In terms of solvency scores, the average solvency scores of RCEP member countries are higher than the overall national average.

RCEP member countries are important destinations for China's foreign direct investment. Data show that as of the end of 2019, China's investment stock in RCEP member countries other than India reached US$161.19 billion, an increase of 4.3% year-on-year. As of the end of 2019, China's investment flows in RCEP member states other than India reached US$15.85 billion.

Germany becomes the country with the lowest risk and the highest rating in the foreign investment rankings

In recent years, Chinese companies have gradually increased their direct investment in Germany, and China and Germany have ushered in new opportunities to deepen bilateral economic and trade cooperation.

The economic and trade cooperation between China and Germany covers a wide range of fields, including traditional fields such as motors, transportation equipment, chemicals, and textile products, as well as emerging fields such as electric vehicles and clean heating. In the future, cooperation in high-tech fields such as intelligent manufacturing, artificial intelligence, digitalization, and 5G can be further promoted.

On the other hand, Germany has introduced a series of preferential investment policies to attract investment, creating a good basic environment for Chinese companies to invest directly in Germany.

In addition, the rail trade between China and Germany has risen sharply, driven by the China-Europe train. In March 2011, the first China-Europe train (Yuxinou) from Chongqing, China to Duisburg, Germany officially opened. In the 10 years since the establishment of the bank, nearly 7,600 flights have been opened in Chongqing, New Zealand and Europe, continuously injecting new impetus into China-Germany economic and trade exchanges and mutually beneficial and win-win cooperation. Cities such as Duisburg in Germany have become European distribution centers for China's land transportation products.

The "China Overseas Investment Country Risk Rating Report" has been released for eight consecutive years. Only by doing risk warning, accurately identifying risks, and effectively responding to corresponding risks, can companies better improve the success rate of overseas investment.