Country-risk Rating of Overseas Investment from China（2018）：Main Report，CROIC-IWEP

I.Rating Background

China’s outbound direct investment hit a new high in 2016，reaching$196.15 billion，making the country the world’s second-largest overseas investor.The volume of its outbound direct investment increased by 34.7% year-on-year in 2016 and accounted for 13.5% of the world’s total—the first time it exceeded 10%.Since 2003，when the Ministry of Commerce joined hands with the National Bureau of Statistics and the State Administration of Foreign Exchange to start releasing authoritative investment data annually，China’s outbound direct investment has kept increasing for 14 consecutive years.From 2002 to 2016，the annual average growth of its outbound direct investment reached 35.8%.In 2016，China’s outbound direct investment once again exceeded the foreign direct investment it received，making it a net capital exporter for two consecutive years.Meanwhile，its outbound direct investment stock hit $1.35739 trillion at the end of 2016，the 6^th largest in the world，two notches up compared with in 2015.In 2016，China had the most overseas M&A deals in history in terms of both number and value of M&A deals.In the future，China is expected to bring out more of its investment potentials and build a win-win cooperative relationship with other countries following its economic transition and upgrading，rising competitiveness of Chinese enterprises in overseas markets and steady advancement of the Belt and Road Initiative.

For example，due to the scrutiny of the Committee on Foreign Investment in the United States，the US President Donald Trump stopped the Canyon Bridge’s proposed purchase of chip maker Lattice.In Germany，the economic ministry decided to reassess the deal of Fujian Grand Chip Investment Fund LP purchasing German semiconductor equipment maker Aixtron at 676 million euro，which means the deal has been blocked.The New Chinatown project in Liverpool，UK has also suffered major setbacks and may not completed，with investment possible unable to be retrieved.Therefore，it is an important prerequisite for Chinese enterprises to effectively conduct risk pre-warning and promptly figure out how serious the risks are and properly handle them if they want to make successful overseas investment.

II.Summary of Rating Methodologies by Rating Agencies

1.Brief Introduction of Country Credit Rating Agencies

The source of country credit rating can be traced back to the United States before the World War I.After about a century of development，the market now is mainly dominated by the three US rating agencies，including Standard & Poor’s，Moody’s and Fitch.They account for more than 90% of the global market share.

With a history of more than 150 years，Standard & Poor’s is a globally known independent credit rating agency.It has offices in 23 countries and regions and conducts sovereign credit rating of 126 countries and regions，updated once a week.With branches in 29 countries and regions and about 7，000 employees，Moody’smainly conducts rating of more than 100 countries and regions engaged in global capital market activities.Fitch is the only rating agency controlled by European capital and its scale is smaller than that of the other two major agencies.Thanks to several mergers and rapid growth，Fitch has grown into a leading international credit rating agency and established 50 branches and joint ventures globally.It focuses on providing independent and forward-looking rating opinions，research results and data reports for the international credit market.

Meanwhile，there have emerged various types of rating agencies that have diversified business priorities.Led by Economist Intelligence Unit（EIU），International Country Risk Guide（ICRG）and IHS Global Insight（GI），those agencies have survived market competition through differen-tiated services.

EIU is an independent unit of the Economist Group.It mainly provides economic forecasting and consulting services in 120 countries and regions.The targeted clients of EIU’s intelligence service are institutions that face cross-border credit or financial risks for their engagement in general credit，trade credit and other commercial activities.

ICRG has started to release international country risk guide regularly since 1980.Currently，the country risk analysis of the guide covers nearly 140 countries and once a month，it releases a quarterly update of data.

Established in 2001，GI now provides comprehensive country risk ana-lysis for more than 3，800 clients，who are mainly investors that have overseas business.The rating of GI covers more than 200 countries and regions.As a consultancy providing paid services，GI conducts analysis that covers a wide range of risks，including business-doing risk in a country，sovereign credit risk and even the operational risk in a region of a country.

Since the building of a rating system is based on a highly scientific，comprehensive and diversified methodology and the collection and handling of data are quite complicated，now the rating market is still dominated by rating agencies of the developed countries.Rating agencies of the developing countries，including China’s Dagong Global Credit Rating Co Ltd，have mostly been at their early stage of development.