Country Risk Analysis

Country: China

Sector: commercial aviation

Must have connection with the textbooks Chapter 6 (see attached)

Country Risk Analysis You will examine the country (i.e. China) from the perspective of a possible location for direct investment on the part of your firm. The purpose of this part of the report will be to provide a country risk assessment. This will involve outlining the economic, regulatory, and political stability of the country as well as any social and cultural risk factors that might help in determining the general level of risk. In general you are examining the country in terms of two aspects of risk – that or expropriation and also credit risk. You report should include brief summaries of the following topics. • A very brief history of the country and basic statistics (population etc.) • Basics of the economy and general economic health/prospects • Domestic stock market – size and liquidity, banking system • Tax environment and any relevant considerations • Political stability and level of corruption • Currency exchange rate system and any currency exchange controls • Any limitations on foreign currency transfers • Geopolitical issues – potential tensions with neighboring countries • Environmental risks, pollution • Social development – education of the labour force, poverty levels, GINI measure • Specific risks of expropriation/nationalization (any historical examples). A large part of your focus will be on trends over the last five years. Forecast of Exchange Rate In addition one section of your report will also provide a medium term (one to five year) forecast of the exchange rate for the currency (i.e. Chinese Yuan) and outline any uncertainties associated with your forecast. Detailed work on this forecast would be included as an Appendix. Specific Company/Industry Risk Your company belongs to a specific sector (i.e. commercial aviation). Particular industrial sectors may have historical reputations and/or risks associated with them. This may be due to the actions and activities of certain companies within the sector which may be viewed as detrimental within certain countries. For example the oil industry has developed a bad reputation in many countries. Many less developed countries have become concerned over the environmental impact of oil companies, the risk of which could lead to civil protest and government expropriation later on. You will assess your industry in terms of this issue by researching any prior environmental, regulatory, corruption or human rights issues that might be associated with it and noting it.

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