Country risk in China is low. China enjoys an investment grade credit rating and an OECD country credit grade of 2. This indicates a relatively low likelihood that it will be unable or unwilling to meet its external debt obligations in a systemic sense (though, needless to say, individual private and ‘sub-sovereign’ debtors can and do default). But the elevated debt burden and willingness to use credit growth to stimulate the economy will bear watching and is a key country risk.
The World Bank’s ease of doing business gauge—which attempts to measure regulation and red tape relevant to a domestic small to medium-sized firm—ranks China’s business climate 46 out of 190 economies, up 32 places since 2016. But the risk of expropriation is elevated, relative to China’s overall rating as Chinese law permits expropriation of foreign invested firms under “special circumstances”, which are not clearly defined.
China’s political risk is on par with its overall rating. But the World Bank still ranks China in the second bottom quartile for most dimensions of governance. China scores in the lowest quartile for voice and accountability.