Our “Risk Composite Index” tracks the comparative level of growth uncertainty for given regional economies, in this case China’s provinces. Riskier provinces have a higher likelihood of growth slowdown or instability.

The most recent data available show that provincial economic risk levels generally decreased as of 2016. Heading into 2018, provincial risk levels are likely similar to YE16, or even moderately improved.

However, risk levels remain elevated vis-à-vis the long-term trend, and members should step up their regional market diligence in 2018 as monetary conditions begin to tighten and potentially exacerbate risks.

Key findings include:

• The provincial Risk Composite Score for 2016 suggests that economic risks decreased from 2015 to 2016 for most provinces. But 2016 economic risk levels are higher than the five-year average of 2011-2015, meaning that economic risk levels remain elevated.
• The decrease in economic risk levels in 2016 was mainly due to the mitigation of some debt risk plus improved industrial performance.
• Higher risk provinces for 2016 were the same as those in 2015; so too for the lower-risk provinces. Of note, relative risk rankings from 2015 to 2016 changed the least since 2011.
• Based on the minimal 2015 to 2016 movement in rankings, and current economic dynamics, most provinces are likely to stay in or near their respective 2016 positions for 2017. [data aberrations like “false reporting” notwithstanding]
• Also, risk levels across provinces show decreasing disparity in 2016 from 2015, with the riskier provinces becoming relatively less risky.  Given the on-going policy priority on “de-risking”, this trend likely continued through 2017.

For the full chart deck, please click here.