Seb Country Analysis Oct 2008 China

China, P.R.: Mainland SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

October 28, 2008

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China is finally seen impacted by the downturn in the rest of the world now that the stimulus  from the Olympics is out of the picture and policy focus has shifted from cooling to boosting as  inflation fears give way to growth fears.  Still, our main case scenario is for growth to remain  above the pain threshold at least for 2009. =

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important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis October 28 2008

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cçê=íÜÉ=åÉ~ê=íÉêã=ïÉ=íÜÉêÉÑçêÉ=ÄÉäáÉîÉ= Private consumption ÖêçïíÜ=ïáää=åçí=ëÉÉ=~=ëÜ~êé=ÇÉÅäáåÉ= Indicators (% change) ~äíÜçìÖÜ=íÜÉ=ìåÇÉêäóáåÖ=ÖêçïíÜ=éçíÉåíá~ä= 24 45 Cars ëÜçìäÇ=ëÉííäÉ=íç=äÉëë=íÜ~å=íÜÉ=éêÉëÉåí=VB=~ë= 22 35 20 25 íÜÉ=ëìééäó=çÑ=ä~Äçê=äÉîÉäë=çÑÑ=áå=íÜÉ=åÉñí= 18 15 ÇÉÅ~ÇÉ=~åÇ=ÇçãÉëíáÅ=ÉñéÉåÇáíìêÉ= 16 5 ÜçéÉÑìääó=ëÜáÑíë=ÑçÅìë=Ñêçã=áåîÉëíãÉåíë=íç= Total 14 -5 éêáî~íÉ=ÅçåëìãéíáçåK=qÜÉ=ä~ííÉê=ïçìäÇ=ÄÉ= 12 -15 2006 2007 2008 ~=ïÉäÅçãÉ=ÇÉîÉäçéãÉåí=~ë=áí=ïçìäÇ=~ää~ó= ÅçåÅÉêåë=~Äçìí=íÜÉ=ÄìáäÇ=ìé=çÑ= Retail Sales Current Prices Domestic Sales, Automobiles çîÉêÅ~é~Åáíó=áå=ëÉîÉê~ä=ëÉÅíçêëI=ïÜáÅÜ=áå= íìêå=ÅçìäÇ=áãéäáÅ~íÉ=ÇçãÉëíáÅ=Ä~åâë=íÜ~í=Ü~îÉ=Ä~ÅâÉÇ=íÜÉ=áåîÉëíãÉåí=Äççã=ïáíÜ= ÅÜÉ~é=ÅêÉÇáíëK=_ìçó~åí=áåîÉëíãÉåí=ÇÉã~åÇ=çîÉê=íÜÉ=êÉÅÉåí=PJQ=óÉ~êë=Ü~ë=~Åíì~ääó= ê~áëÉÇ=íÜÉ=áåîÉëíãÉåíJíçJdam=ê~íáç=íç=~å=áåÅêÉÇáÄäÉ=RRB=~ÅÅçêÇáåÖ=íç=ëçãÉ= Éëíáã~íÉëK N =qÜÉ=èìÉëíáçå=áë=áÑ=íÜÉ=ïáåÇJÇçïå=çÑ=íÜ~í=áåîÉëíãÉåí=Äççã=Å~å=ÄÉ= ~ÇãáåáëíÉêÉÇ=áå=~=íáãÉäó=~åÇ=Öê~Çì~ä=Ñ~ëÜáçåK===

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1

Oxford Economics, September 29, 2008. 2

SEB Merchant Banking Country Risk Analysis October 28 2008

ÅçåÑáÇÉåÅÉ=áåÇáÅ~íçê=ëáåÅÉ=OMMTI=íÜáë=ÇçÉë=åçí=ÅçåîáåÅÉ=ìë=íÜ~í=ïÉ=~Åíì~ääó=Ü~îÉ= çÄëÉêîÉÇ=~=ëíÉéJìé=áå=ÅçåëìãÉê= ëéÉåÇáåÖK=få=Ñ~ÅíI=íÜÉ=êÉÅÉåí= Private consumption indicators in China ëíÉÉé=Ñ~ää=áå=ÄáÖJíáÅâÉí=áíÉãë= áåÅäìÇáåÖ=~ìíçãçÄáäÉë=áë=åçí= As in many other countries, the two main sources of private consumption are the national accounts and the retail sales áåÇáÅ~íáîÉ=çÑ=Ü~ééó=ÅçåëìãÉêëI= index. Because of the higher frequency of the latter, it is ~äíÜçìÖÜ=ïÉ=~Çãáí=íÜÉ=ä~ííÉê= the more often quoted. However, the retail sales indicator ã~ó=Ü~îÉ=ÄÉÉå=áåÑäìÉåÅÉÇ=Äó= does not measure private consumption as such, and can therefore be a faulty indicator for the following reasons: äÉëë=ëìééçêíáîÉ=ÇçãÉëíáÅ=ÅêÉÇáí= ã~êâÉíë=áå=êÉÅÉåí=ãçåíÜëK=JJ= 1. It does not capture the consumption of most services, ^äëç=íÜÉ=ëíÉÉé=Ñ~ää=áå=íÜÉ=ëíçÅâ= meaning it likely under-reports the true level and perhaps also the true growth of total private ã~êâÉíI=~=Çêçé=çÑ=ëçãÉ=TMB=çîÉê= consumption. íÜÉ=ä~ëí=NO=ãçåíÜ=éÉêáçÇI=áë= ìåäáâÉäó=íç=Ü~îÉ=äáÑíÉÇ=ÅçåëìãÉê= 2. According to experts, “retail sales” are likely to ëÉåíáãÉåíI=ÉîÉå=íÜçìÖÜ=áí=~ÑÑÉÅíë= include many purchases of input goods by producers thereby overstating the true level of private çåäó=RB=çÑ=ÜçìëÉÜçäÇë=ÇáêÉÅíäóK== consumption.1 i~ëíäóI=íÜÉ=ÇÉÅäáåáåÖ=éêçéÉêíó= ã~êâÉíI=áå=é~êíáÅìä~ê=Ñçê=íÜÉ= 3. It focuses on store sales, and therefore likely underreports private consumption in rural districts, while ìééÉê=äìñìêó=ëÉÖãÉåí=çÑ= over-reports private consumption in the cities. ÜçìëáåÖ=ìåáíë=áå=íÜÉ=ä~êÖÉê=ÅáíáÉëI= Because of the rapid immigration into the cities this ã~ó=Ü~îÉ=ÇÉåíÉÇ=ëÉåíáãÉåí= effect can be estimated to an error of about 3 percentage points on the upside in any normal year, ~ãçåÖ=ã~åó=ÜáÖÜJëéÉåÇáåÖ= which has nothing to do with consumption as such, `ÜáåÉëÉK=== just the way people are doing their shopping. If correct that in the final preparations to the Olympics

`Üáå~Ûë=ÅçåëìãÉêë=Ó=ïÜ~í=Çç= more migrant workers than usual were drawn to the óçì=ÑÉ~ê\==j~åó=çÄëÉêîÉêë=~êÉ= construction sites of the Beijing area, this effect may have been extra strong over the last year and therefore ëíáää=ÅçåÅÉêåÉÇ=íÜ~í=íÜÉ=äçåÖ= explains much of the rise in the index since 2007. But ÜçéÉÇ=Ñçê=ëÜáÑí=áå=ÇçãÉëíáÅ= this should clearly not be interpreted as a rise in total ÇÉã~åÇ=Ñêçã=áåîÉëíãÉåíë=íç= nationwide private consumption. éêáî~íÉ=Åçåëìãéíáçå=Ü~îÉ=åçí= 4. As a final caveat one may also note the difficulty in óÉí=~êêáîÉÇK==aÉëéáíÉ=vJçJv= correctly calculating real numbers from the original áåÅêÉ~ëÉë=áå=ï~ÖÉë=åçï= nominal retail sales numbers when prices unexpectedly shoot up as they did in early 2008. ÉñÅÉÉÇáåÖ=ÉîÉå=NUB=Ñçê=íÜÉ= ëÉÅçåÇ=óÉ~ê=êìååáåÖI=íÜÉ= ÜçìëÉÜçäÇ=ë~îáåÖë=ê~íÉ=Ü~ë=áå= Ñ~Åí=êáëÉå=Äó=S=éÉêÅÉåí~ÖÉ=éçáåíë= çîÉê=íÜÉ=ä~ëí=ÇÉÅ~ÇÉ=íç=OQBI=~ÅÅçêÇáåÖ=íç=~=åÉï=fjc=êÉéçêíK O ==jçêÉçîÉêI=íÜÉ=êáëÉ=áë= ~Åêçëë=~ää=ÇÉãçÖê~éÜáÅ=ÖêçìéëI=áåÅäìÇáåÖ=íÜçëÉ=íÜ~í=Å~å=ÉñéÉÅí=ê~éáÇ=áåÅçãÉ=ÖêçïíÜ= áå=íÜÉ=ÑìíìêÉK==^ë=Éñéä~å~íáçåë=Ñçê=åÉï=ë~îáåÖ=ãçíáîÉë=íÜÉ=fjc=éçëáí=íÜÉ=ÇÉÅäáåáåÖ= éìÄäáÅ=éêçîáëáçå=çÑ=ÉÇìÅ~íáçåI=ÜÉ~äíÜ=~åÇ=ÜçìëáåÖ=ëÉêîáÅÉë=~åÇ=íÜÉ=ã~ÅêçÉÅçåçãáÅ= ìåÅÉêí~áåíó=~ëëçÅá~íÉÇ=ïáíÜ=íÜÉ=íê~åëáíáçå=íç=~=ã~êâÉí=ÉÅçåçãóK==qÜÉ=êÉãÉÇó=Ñçê= ã~ÅêçÉÅçåçãáÅ=ëí~Äáäáò~íáçå=ëÉÉãë=íÜÉêÉÑçêÉ=íç=ÄÉ=èìáíÉ=çÄîáçìëW=áãéêçîÉ=íÜÉ=ëçÅá~ä= ë~ÑÉíó=åÉí=~åÇ=êÉé~áê=Ç~ã~ÖÉÇ=éìÄäáÅ=ëÉêîáÅÉëI=áåÅäìÇáåÖ=áå=íÜÉ=Åçìåíêó=ëáÇÉK== eçïÉîÉêI=áí=ã~ó=ÄÉ=çéíáãáëíáÅ=íç=ÄÉäáÉîÉ=íÜ~í=ïÜ~í=~ééÉ~êë=íç=ÄÉ=äçåÖ=ÉåíêÉåÅÜÉÇ= ÅçåëìãÉê=ÄÉÜ~îáçê=ëÜçìäÇ=ÅÜ~åÖÉ=çîÉêJåáÖÜí=áå=êÉëéçåëÉ=íç=ëìÅÜ=ãÉ~ëìêÉëK==^ë=~= êÉëìäíI=áå=íÜÉ=ãÉ~åíáãÉ=íÜÉ=äáâÉäáÜççÇ=áë=Ñçê=íÜÉ=ÖçîÉêåãÉåí=íç=Ñ~ää=Ä~Åâ=çå=ÄççëíáåÖ= áåîÉëíãÉåíë=áå=áåÑê~ëíêìÅíìêÉ=~åÇ=ÅçåëíêìÅíáçå=áå=çêÇÉê=íç=ã~âÉ=ìé=Ñçê=ÇÉÅäáåáåÖ= ÅçåíêáÄìíáçå=íç=ÖêçïíÜ=Ñêçã=åÉí=ÉñéçêíëK== qÜÉ=ÉñÅÜ~åÖÉ=ê~íÉ=~åÇ=êáëâë=çÑ=íê~ÇÉ=ÅçåÑäáÅíëK=páåÅÉ=êÉÅÉåí=ãçåíÜëÛ=Ççää~ê=êÉÅçîÉêó= `Üáå~Ûë=ÅÉåíê~ä=Ä~åâ=Ü~ë=ëíçééÉÇ=~ééêÉÅá~íáåÖ=íÜÉ=êÉãáåÄá=~Ö~áåëí=íÜÉ=rp=ÅìêêÉåÅóK= tÜáäÉ=Å~ääë=Ñçê=~=ãçêÉ=ê~éáÇ=êáëÉ=áå=íÜÉ=ÉñÅÜ~åÖÉ=ê~íÉ=Ü~îÉ=ëçÑíÉåÉÇI=íÜÉêÉ=áë=çåÅÉ= 2

Why are savings rates of urban households in China rising? IMF, 2008 3

SEB Merchant Banking Country Risk Analysis October 28 2008

~Ö~áå=~=ÖêçïáåÖ=êáëâ=çÑ=åÉï=~åÇ=éÉêÜ~éë=ãçêÉ=ëÉîÉêÉ=íê~ÇÉ=ÅçåÑäáÅíë=ïáíÜ=ã~àçê= íê~ÇáåÖ=é~êíåÉêëI=áå=é~êíáÅìä~ê=íÜÉ=br=~åÇ=íÜÉ=rpI=~ë=íÜÉëÉ=ÅçìåíêáÉë=åçï=ëÉÉã=äáâÉäó= íç=Öç=áåíç=~=äçåÖÉê=éÉêáçÇ=çÑ=îÉêó=ïÉ~â=ÖêçïíÜ=~åÇ=àçÄJäçëëÉëK=^=éçéìä~ê=ëÉåíáãÉåí= áå=íÜÉëÉ=éä~ÅÉë=ã~ó=êáëÉ=~Ö~áåëí=~åó=Åçìåíêó=ëÉÉå=~ë=ã~áåí~áåáåÖ=ìåÇìäó=ÅçãéÉíáíáîÉ= ÉñÅÜ~åÖÉ=ê~íÉë=íç=ëÜáÉäÇ=áíë=çïå=Éñéçêí=áåÇìëíêáÉëK==få=íÜ~í=Å~ëÉ=`Üáå~=ã~ó=Ü~îÉ=íÜÉ= ÅÜçáÅÉ=çÑ=íïç=åçåJé~ääá~íáîÉëI=êÉî~äìÉ=Äó=ëçãÉ=PMB=çê=Ñ~ÅÉ=äçìÇ=Å~ääë=Ñçê=íê~ÇÉ= êÉëíêáÅíáçåë=~Äêç~ÇK=få=çìê=éêÉîáçìë=êÉéçêíI=ïÉ=~å~äóòÉÇ=ïÜó=íÜáë=ã~ó=ÄÉ=~=ÇáÑÑáÅìäí= ÅÜçáÅÉ=Ñçê=`Üáå~I=áåÅäìÇáåÖ=äáâÉäó=îÉëíÉÇ=áåíÉêÉëíë=áå=íÜÉ=Éñéçêí=áåÇìëíêó=ïáíÜ=ÜáÖÜJ äÉîÉä=éçäáíáÅ~ä=Åçåí~ÅíëK==qÜáë=íáãÉ=ïÉ=ëáãéäó=éçáåí=çìí=íÜ~í=íÜÉ=ïçêëÉåÉÇ=çìíäççâ=Ñçê= íÜÉ=ÖäçÄ~ä=ÉÅçåçãóI=ÅçìäÇ=ÄêáåÖ=íÜáë=áëëìÉ=íç=~=ÜÉ~Ç=ÄÉÑçêÉ=äçåÖK==låÉ=ï~ó=çê=íÜÉ= çíÜÉê=ïÉ=ÉñéÉÅí=`Üáå~=íç=ëÉÉ=~=ëÜ~êéÉê=ÇÉÅäáåÉ=Ñçê=áíë=åÉí=ÉñéçêíëK==pçãÉ=~êÖìÉ=íÜ~í=áí= ã~ó=ÅçãéÉåë~íÉ=íÜ~í=Äó=ÇáêÉÅíáåÖ=Éñéçêíë=íç=çíÜÉê=ÇÉîÉäçéáåÖ=ÅçìåíêáÉëK=fí=Ü~ë=Ü~Ç= ëçãÉ=ëìÅÅÉëë=ïáíÜ=íÜ~í=áå=êÉÅÉåí=óÉ~êë=~åÇ=ê~áëÉÇ=Éñéçêíë=Äó=~=Ü~äÑ=íç=i~íáå=^ãÉêáÅ~= ~åÇ=^ÑêáÅ~I=ïÜáÅÜI=ÜçïÉîÉêI=ëíáää=Åçìåí=Ñçê=äÉëë=íÜ~å=NMB=çÑ=íçí~ä=`ÜáåÉëÉ=ÉñéçêíëK= eçéÉë=íÜ~í=íÜÉ=çáä=êáÅÜ=ÅçìåíêáÉë=áå=íÜÉ=jáÇÇäÉ=b~ëí=~åÇ=oìëëá~=ëÜçìäÇ=ÅçãÉ=íç=íÜÉ= êÉëÅìÉI=ãìëí=åçï=~äëç=ÄÉ=Ñ~ÇáåÖ=~ë=íÜÉ=çáä=éêáÅÉ=åçëÉJÇáîÉëK=== JGJ= qÜÉ=êÉëéÉÅíÉÇ=ÉÅçåçãáëí=~åÇ=ÄäçÖÖÉêI=_ê~Ç=pÉíòÉêI=éêçåçìåÅÉÇ=ÇìêáåÖ=~=pÉå~íÉ= ÜÉ~êáåÖ=ëçãÉ=íáãÉ=~ÖçI=íÜ~í=`Üáå~=ÅçåíáåìÉÇ=íç=ÇÉÑó=íÜÉ=çäÇ=ë~óáåÖ=íÜ~í=ïÜ~í= Å~ååçí=Öç=çå=Ñçê=ÉîÉê=ãìëí=çåÉ=Ç~ó=ëíçéK=eçïÉîÉêI=ïÉ=íÜáåâ=ïÉ=Ü~îÉ=ÜÉ~êÇ=íÜ~í= ëíçêó=ÄÉÑçêÉI=ëçãÉ=OM=óÉ~êë=~ÖçI=íÜ~í=íáãÉ=~Äçìí=~åçíÜÉê=^ëá~å=ãáê~ÅäÉI=g~é~åI=Ñçê= íÜÉå=íç=ÄÉ=êÉéÉ~íÉÇ=Ñçê=íÜÉ=“^ëá~å=íáÖÉêëÒK==qÜÉ=èìÉëíáçå=áë=åçí=áÑ=íÜÉ=`Üáå~=ãáê~ÅäÉ= ïáää=ÅçãÉ=íç=~å=ÉåÇI=Äìí=Éñ~Åíäó=ïÜÉå=~åÇ=ÜçïK==tÉ=íÜáåâ=íÜÉ=íáãáåÖ=Ü~ë=ÅçãÉ= ÅäçëÉê=~ë=íÜÉ=äáâÉäó=ëÉîÉêÉ=Ççïåíìêå=áå=íÜÉ=ïçêäÇ=ÉÅçåçãó=ã~ó=ÄêáåÖ=áí=ìé=ëççåÉê= íÜ~å=ã~åó=ÉñéÉÅíI=ÉëéÉÅá~ääó=áÑ=`Üáå~=êÉã~áåë=áåíê~åëáÖÉåí=çå=íÜÉ=ÉñÅÜ~åÖÉ=ê~íÉ= áëëìÉK==tÉ=~êÉ=ëíáää=ìåÅÉêí~áåI=ÜçïÉîÉêI=Üçï=áí=ïáää=ÉåÇW=äáâÉ=íÜÉ=^ëá~å=íáÖÉêëI=áå=~= ëéÉÅí~Åìä~ê=Åçää~éëÉ=çê=~ë=g~é~å=áå=äçëí=ÇÉÅ~ÇÉë=çÑ=ëí~Öå~íáçå\=^=íÜáêÇ=ëÅÉå~êáç=áë= ~äëç=éçëëáÄäÉW=~=ã~å~ÖÉÇ=ëäçïáåÖ=ïáíÜçìí=ãìÅÜ=Çê~ã~K==pç=Ñ~ê=ïÉ=ÖáîÉ=`Üáå~=íÜÉ= ÄÉåÉÑáí=çÑ=íÜÉ=ÇçìÄí=~åÇ=ëÉÉ=íÜÉ=íÜáêÇ=ëÅÉå~êáç=~ë=íÜÉ=ãçêÉ=äáâÉäóI=ïáíÜçìí=ÉñÅäìÇáåÖ= íÜÉ=éçëëáÄáäáíó=çÑ=íÜÉ=ëÉÅçåÇI=Äìí=ã~áåäó=ÇáëãáëëáåÖ=íÜÉ=éçëëáÄáäáíó=çÑ=íÜÉ=ÑáêëíK==få= ã~åó=êÉëéÉÅíë=`Üáå~Ûë=ÇÉîÉäçéãÉåí=çîÉê=êÉÅÉåí=óÉ~êë=êÉëÉãÄäÉë=g~é~åÛë=áå=íÜÉ=NVUMI= áåÅäìÇáåÖ=Ä~åâ=Ñáå~åÅÉÇ=çîÉêáåîÉëíãÉåíëK==få=Åçåíê~ëíI=`Üáå~=~ééÉ~êë=íç=Ü~îÉ=íçç= ãìÅÜ=Ñáå~åÅá~ä=ãìëÅäÉI=áåÅäìÇáåÖ=êÉëÉêîÉëI=íç=Åçää~éëÉ=äáâÉ=~=ÜçìëÉ=çÑ=Å~êÇë=~åóíáãÉ= ëççåK==qÜ~íI=ÜçïÉîÉêI=ÇÉéÉåÇë=çå=éçäáíáÅ~ä=êÉëáäáÉåÅÉ=êÉã~áåáåÖ=~ë=ëíêçåÖ=~ë=áí=Ü~ë=áå= g~é~åI=~å=áëëìÉ=ïÉ=äÉ~îÉ=Ñçê=ÑìíìêÉ=ÇáëÅìëëáçåK=== Key ratios

2008

GDP/capita ($)

3188

Resilience 15

10

GDP (%chg.)

10%

Inflation

6%

Trade balance/GDP

8%

Reserves/imports (months)

-1%

Government debt/GDP

11%

cáíÅÜW=^H pCmW==^=mçë=

mÉÉêëW hçêÉ~ oìëëá~ `ÜáäÉ

5

Liquidity

0

17

Budget balance/GDP

bñíÉêå~ä=ê~íáåÖëW=

cro balance

Absence of event risk

China Russia

Information

Average EM

Graph: China scores above average on macro balance and liquidity but is weaker on reliable information than the average emerging market country, including Russia. Resilience and event risk is about the average of emerging markets. 4

=

SEB Merchant Banking Country Risk Analysis October 28 2008

Key data: 2003 2004 2005 2006 2007 2008 2009 1 640 970 1 931 650 2 238 360 2 649 140 3 252 620 4 259 680 5 142 990 GDP (mill.US$) 1267 1481 1705 2006 2449 3188 3827 GDP/capita (US$) 10,0% 10,1% 10,4% 11,6% 11,9% 9,2% 8,5% GDP (%chg.) 42% 46% 50% 53% 57% 58% 57% Investments/GDP Budget balance/GDP -2% -1% -1% -1% -1% -1% -2% 16% 16% 15% 14% 13% 11% 11% Govt debt/GDP 1,1% 3,8% 1,8% 1,7% 4,8% 6,4% 4,0% CPI inflation (%chg.) Money demand (%chg.) 12,4% 11,4% 10,1% 12,8% 14,0% 10,9% 10,8% -7% -1% -21% 59% 144% Stock prices (%chg.) 5,3% 5,4% 5,6% 5,9% 6,7% 7,3% 5,7% Interest rates 8,28 8,28 8,19 7,97 7,61 6,92 6,47 Exch. Rate ($) Trade/GDP (%) 51% 58% 62% 65% 65% 62% 59% $29 $38 $54 $65 $73 $103 $65 Oil price (Brent) Millions US $ Export of goods 438 270 593 393 762 484 969 682 1 220 000 1 474 170 1 675 040 393 618 534 410 628 295 751 936 904 618 1 174 560 1 336 190 Imports of goods 1 223 9 676 26 629 32 120 56 451 55 572 47 679 Other: Current account ($ mill) 45 875 68 659 160 818 249 866 371 833 355 182 386 529 (% of GDP) 2,8% 3,6% 7,2% 9,4% 11,4% 8,3% 7,5% 47 229 53 132 67 821 60 265 48 958 57 381 44 642 FDI -29 869 -16 289 -20 848 -18 122 -23 829 -29 613 -33 497 Loan repayments Net other capital flows 46 154 40 441 21 929 -64 942 9 121 88 610 -14 884 Balance of payments 109 389 145 943 229 720 227 067 406 083 471 560 382 790 367 317 513 260 742 980 970 047 1 376 130 1 847 690 2 230 480 Reserves 200 082 232 983 268 896 307 383 335 000 347 147 357 225 Total debt 79 688 105 391 136 081 163 961 181 753 189 732 196 782 o/w short term debt Source: OEF (Oxford Economic Forecasting) and SEB estimates. Rating history Fitch (eoy) S&P (eoy) Type of government: Next elections Other: Latest PC deal Recent IMF programs

11,8% 5,1% 6,17 58% $65 1 932 870 1 590 910 38 746 380 706 6,2% 51 974 -37 035 -32 715 362 930 2 593 410 366 488 202 956

AAAA A BBB BBB+ AA A Communism rule (experiments with free elections at local levels) N/A None None

S p o t a n d fo r w a r d r a te s , U S D /C N Y 8 ,5 0

S h a n g h a i S to c k E x c h a n g e 7000

Spot

8 ,2 5 8 ,0 0

2010 6 125 040 4532 8,2% 56% -2% 11% 3,4%

6000

NDF

7 ,7 5

5000

7 ,5 0

4000

7 ,2 5

3000

7 ,0 0 6 ,7 5

2000

6 ,5 0

1000

6 ,2 5 05

06

S p o t R a te s , U S D /C N Y , C lo s e

07

0

08

96

97

98

99

00

01

02

F o r w a r d R a te s , U S D /C N Y 1 2 M o n th O u tri g h t, B i d S o u r c e : R e u te r s E c o W i n

03

04

05

06

07

08

S o u rc e : R e u te rs E c o W i n

percent

70 60 50 40 30 20 10 0 2002

2004

2006

2008

USD Trillions (thousand billions)

F o re ig n re s e rv e s

Investments/GDP

Source: OEF

2 ,0 0 1 ,7 5 1 ,5 0 1 ,2 5 1 ,0 0 0 ,7 5 0 ,5 0 0 ,2 5 0 ,0 0

2000

2002

2004

2006

2008 S o u r c e : R e u te r s E c o W i n

5

SEB Merchant Banking Country Risk Analysis October 28 2008

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