Country risk in China is low. China has 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. That said, individual private and sub-sovereign debtors can and do default from time to time. The elevated economy-wide debt burden and willingness to extend credit to stimulate the economy remains a prominent risk to China’s country ratings.
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 31st out of 190 economies, up 47 places since 2016. China made significant gains in dealing with construction permits and protecting minority investors in 2019.
But the risk of expropriation is elevated relative to China’s overall rating. 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. Political risk deteriorated in 2019 because of widespread discontent in Hong Kong and ongoing trade tensions with the US that adds to economic uncertainty. 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.