Credit risk in China

Credit risk in China means the country will find it very hard to grow. Global credit ratings agency Fitch Ratings has warned that the extent of china credit could make it very difficult for the country to grow its way out of excesses as it has in the past. The comments suggest tougher times ahead, which could impact on businesses.

Over the last decade China has grown at an impressive rate making it an attractive prospect for firms worldwide. However, the report from Fitch Ratings found that the ratio of credit to GDP now stands at 200 per cent, leading to the agency predicting muted growth.

Speaking to the Telegraph, Charlene Chu, Fitch Rating's senior director in Beijing, said, "The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation.

"There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling."

China's credit bubble could affect British businesses operating in the region. Ensuring that suppliers and customers are regularly checked for stability and creditworthiness is key for maintaining a strong supply chain.

Graydon's International Credit Risk Assessment Monitoring services enables businesses to keep up to date with trading partners'current situations. The latest credit information is automatically added to a client’s database allowing them to monitor critical events and rating changes. Additionally, email alerts are sent the second new occurs so businesses can rest assured they will be well informed should risk emerge.

Many UK businesses have offset European losses due to increasing demand in China and other fast-growth nations but it is vital for them to remain cautious and alert for changing market conditions.