1. Effective Credit Risk Management for Doing Business in China
CRIF Hong Kong Limited

2. About CRIF 2

3. CRIF AT A GLANCE
30+ 70 4
4,400+
country-based operations
subsidiary companies
continents
staff professionals to serve you
6,300+
55,000+
310,000+
financial institutions
business clients
consumers
use CRIF services in 50 countries 20
500+
countries with credit bureau solutions
software installations 3

4. CRIF COMPANIES AROUND THE WORLD
Countries & Regions 4

5. About China Market

6. Some Figures about China Market
China’s GDP
Period
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Comparison (year on year)
+6.9%
+6.8%
Source: The National Bureau of Statistics of China
China’s Export Value
Period
Dec 2017
Jan 2018
Feb 2018
Mar 2018
Comparison (year on year)
+10.9%
+11.1%
+44.5%
-2.7%
Source: The General Administration of Customs of China

7. Some Figures about China Market
Chinese Consumer Price Index (CPI)
Period
Dec 2017
Jan 2018
Feb 2018
Mar 2018
Comparison (year on year)
+1.8%
+1.5%
+2.9%
+1.2%
Source: The National Bureau of Statistics of China
Chinese Total Retail Sales of Consumer Goods
Period
Dec 2017
Jan and Feb 2018
Mar 2018
Comparison (year on year)
+9.4%
+9.7%
+10.1%
Source: The National Bureau of Statistics of China

8. Ranking of Creditworthiness in Different Regions of China
Shanghai
Beijing
Jiangsu
Guangdong
Shandong
Zhejiang
Tianjin
Liaoning
Sichuan
Hebei
Decrease in Creditworthiness
Source：China Shippers’ Association

9. The Ranking of Creditworthiness of Different Enterprise Forms in China
State - owned enterprises
Foreign and Hong Kong, Macao and Taiwan invested enterprises
Limited liability company
Private enterprise
Sole proprietorship
Decrease in Creditworthiness
Source：China Shippers’ Association

10. Main Credit Risks faced by Chinese Enterprises
Arrears of payment, loans, taxes
Breach of contract
Manufacturing of counterfeit products
Disclosure of false information
Quality fraud
Trademark infringement, patent infringement
Price fraud
Source：Investigation on Credit Problem of Chinese Enterprises

11. Changes in Middle-Class Family in China
Class category
% in 2012
Estimated % in 2022
Affluent 3 9
Upper Middle 14 54
Mass Middle 22
Poor 29 16
Affluent: Annual household income > USD34,000
Upper Middle: Annual income from USD16,000 to USD34,000
Mass Middle: Annual income from USD9,000 to USD16,000
Poor ︰Annual income < USD9,000
Source：McKinsey

12. Potential Markets Market Demand of Middle-Class in China
Sporting goods and equipment
Health and green foods
Trendy and personalised household products
Trendy and personalised services
Financial investment
Automobile after-sale services
Source：HKTDC

13. Credit Risk Management

14. Need of business information
Importance of KYC
Understanding the background of your potential / existing customers and suppliers to find reliable business partners and reduce credit risk.
Meeting companies’ compliance requirement（e.g. anti-money laundering）
However, in international trade, due to language, geographical and other barriers, companies often encounter difficulties in obtaining information on partners.
Need of business information

15. Organization, Analysis
What is Business Information?
Big Data
Organization, Analysis
Useful information
Make the right
business decisions

16. Why you need the Business Information?
New Customer acquisition
Existing customer review
Change of payment terms / credit terms
Change of customers’ orders
Large project
Delay payments
Disputes / litigation 16

17. In a Business Information Report
Registration Details
Financial
Operation Details
Negative Information
Rating
Overview
Registration details
Shareholders
Key management
History
Related companies
Balance Sheet / P&L
Industry Benchmarking
Remarks
Import & Export date
Employee Size
Office location
Operation background
Litigation
Public News
Payment details
Rating
Default Rate 17

18. Business Registration Information
Shareholding
Full shareholder list
Change in shareholders
Information of majority & minority shareholders details e.g. registered capital / phone no. / business description (if location is in China)
Showing ultimate controller 18

19. Business Registration Information
Key Executives
Outbound Investment & Position of
Legal Representative
Useful information to find out affiliates, in order to prevent fraud case / reduce credit risk
Most of the trade fraud related to using company affiliates 19

20. Mortgages & Charges (if available)
Subsidiary
Mortgages & Charges (if available) 20

21. Trademark and Patent
Trademark
Patent 21

22. Financial Statements (if available)22

23. Industry Benchmarking23

24. Operation (Export data)
Export data may be compared to the Sales in the financial statement
Knowing the percentage of export to certain country helps to judge the trade risk 24

25. Operation (Import data)
Import data may be compared to the Cost of Goods Sold in the financial statement
Knowing the percentage of import from certain country helps to judge the trade risk 25

26. Litigation
Plaintiff or defendant? 26

27. Immediately contact the buyers /
Please be aware of the below signals:
Litigation record (plaintiff / defendant)
Erratic payment
Broken promises
Failure to return message
Post-dated cheque / returned cheque (lack of cash flow)
Financial restructuring or change of bank information
Return of goods without content
Exceptionally low selling price
Sudden increase in purchase orders without reasonable explanation
Business overexpansion
Immediately contact the buyers /
suppliers to understand the situation,
take appropriate action to reduce losses!