Denmark's exports to China have increased significantly in recent years, and China is now Denmark's largest export market in Asia. For EKF, China is one of its medium-sized markets in Asia, with EKF commitments totalling approx. DKK 0.5bn. A significant share of these commitments is made up of the Danish government's Mixed Credits (Danish International Development Agency – DANIDA – assistance programme of zero or low-interest loans).
China is a single-party state with limited organisational freedom and restrictions on freedom of speech. In the medium term, China's political system is regarded as stable. However, local social unrest is predicted as a result of factors such as social inequality, environmental problems and civil/worker rights violations by authorities and employers. Any unrest of this kind is not, however, expected to escalate into national protest movements or nationwide riots.
The Chinese growth package during the global financial crisis was officially DKK 600 billion, and was a contributory factor in moderating the ensuing decline in GDP growth. Sustained high economic growth is anticipated, with continued high surpluses in the balance of payments. China has vast currency reserves, and the country is expected to remain willing and able to service the government's external debts. There is some uncertainty surrounding the indebtedness and debt-servicing capacity of local authorities and companies co-owned by the state. The country's economic challenges include realignment towards a more domestically driven economy; the continued pressure to revalue the currency; increasing reliance on imports of raw materials and the transition to more intensive, knowledge-based production. From a political perspective, there is also great focus on the risk of the economy overheating, including caps on inflation and the liquidity of the banks.
The commercial climate is complicated. The problems stem from factors such as corruption and expropriations compounded by a complex legal system. The risk of expropriation in connection with foreign investments is, however, assessed as being low.
EKF anticipates increased requests for services to cover China, where investment guarantees may be in demand as a result of the complicated commercial climate.