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An unsure future for natural gas: How risks could derail the current boom

The energy industry is quickly evolving: as renewable energy sources increase in popularity compared to fossil fuels, their costs are plummeting. New forms of electricity conservation have recently become the focal point of widespread international attention, resulting in heavy investment and research. Furthermore, natural gas is increasingly losing its reputation as a cleaner energy source in the battle against climate change, as it pollutes more than renewable alternatives.

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The great industrial rotation continues - Country and Sector risks Barometer

Signs of the global economic slowdown continued to accumulate at the beginning of 2019: companies are much less confident than a year ago, and global trade is showing signs of fatigue.

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Corporate insolvencies in France: micro-entreprises in the wave’s trough

During the first four months of 2019, the rate of corporate insolvencies in France increased by +0.8%. This rate was particularly high during January and February, mainly due to the repercussions of the "gilets jaunes" (yellow vests) movement; however, the increasing rate of insolvencies declined in March and April. Nonetheless, Coface anticipates that, despite resilient economic growth, insolvencies will increase by +1.7% over the whole of 2019 (…)

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From copycat to early bird: Taking stock of China’s 5G ambitions

China has rapidly become a big player in 5G technology, thanks to the government’s strategy and its support of high investment in Research and Development (R&D). This new technology is part of the Made in China 2025 initiative, through which the Chinese government targets self-sufficiency in high-end industries. China coordinated its approach to 5G and some successes are already visible. For example, 40% of global patents for current 5G network standards are from Chinese firms. Moreover, Chinese companies are set to benefit from 5G. Huawei is the global leader in network infrastructures; it currently holds 29% of the market (...)

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Country risk assessment map - April 2019

New edition of the country risk map. Consult, download and print the map of the 161 countries assessed by Coface.

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Central Asia: is the ménage à trois with China and Russia sustainable?

Central Asia is both a partner and a trade gateway for China and Europe. It is located on two branches of the New Silk Road. Despite criticism, China is the most involved in the development of Central Asian corridors. This deployment is not obvious given the competition from other routes and poor regional cooperation. While Russian influence remains significant through expatriate remittances, its military bases, and culture, it is being supplanted by China in economic matters.

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Despite five years of “Modinomics”, India continues to be constrained by economic fragilities

When Narendra Modi ran for Prime Minister in 2014, he pledged to boost the competitiveness of India’s industrial sector to promote growth. Five years later, the economy is in a better position, but many of the structural fragilities that Modi inherited continue to afflict India today. In particular, a mixed track record in terms of executing three crucial economic reforms has dampened enthusiasm for Modi: the new insolvency and bankruptcy code, demonetisation, and the introduction of a harmonised goods and services tax. India will host its next general election from April 11 to May 19, with Modi running again. Assuming he manages to secure enough votes to win a simple majority, the 17th Lok Sabha (Parliament) will likely be a more fragmented one, which could slow India’s reform process. The incoming administration will have to focus on cleaning up the banking sector as well as boosting employment to support India’s burgeoning workforce. Achieving this while simultaneously promoting macroeconomic stability will likely prove challenging.

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Latin America: Brazil and Mexico’s Oil Industries – Opposite Policies?

In the context of a global oil market that is likely to remain volatile (Chart 2), the two largest Latin American economies – Brazil and Mexico – are expected to implement significant changes in their energy policies in the medium term. Both countries have appointed new presidents in the last year following polarised elections: in Brazil the right-wing president Jair Bolsonaro took office in January 2019, while December 2018 saw the arrival of left-wing André Manuel Lopez Obrador (AMLO)1. Similarly, the two oil industries share two main common features: their state-owned companies have experienced significant financial and governance issues, and both countries are crude oil exporters and net oil derivative importers. Conversely, in terms of energy policies, they appear to be taking opposite directions.

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China Payment Survey 2019: Longer Delays as Growth Falters

The Chinese economy experienced some challenges i n 2018. Corporate bond defaults in US dollars quadrupled, reaching an amount of USD 16 billion, while the number of bankruptcy cases settled through the Supreme Court of the People’s Republic of China spiked to 6,646. Deleveraging
efforts led to tighter liquidity conditions during the first half of 2018. This coincided with an escalation of trade tensions between the United States and China, which eroded consumer sentiment, resulting in weaker domestic consumption.

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Turkey’s economic slowdown continues, but exports offer some support

Turkey is experiencing a severe economic slowdown, coupled with a jump in inflation, as a result of the sharp depreciation of the lira during 2018 . This sharp depreciation has resulted in reduced consumption, and has impacted investment dynamics in the domestic market. The import-dependent structure of production has pushed the inflation rate to all time high levels, which forced the central bank to deliver a large rate hike in September. Although this rate hike has helped the Turkish lira to recover from these historical weak levels, it caused borrowing costs to rise extremely high, making funding extremely costly for both businesses and households. Growth is expected to remain very subdued and inflation at double digits.

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Poland Payment Survey 2019: Robust Economic Growth as not Eliminated Payment Delays

For 70 years, Coface has helped companies trade safely around the world. Our credit insurance protection and credit management services help ensure that our 40,000 clients will get paid for the merchandise or services delivered to their customers.

With 4,200 employees located in 67 countries, Coface has the global coverage and the on-the-ground knowledge to make thousands of credit decisions each day. We work in partnership with our clients at every stage of their business life cycle, helping them to anticipate and evaluate risks in order to make the right credit decisions.

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Tighter global liquidity and Asia: not all gloom and doom

Asia has been under pressure following from tighter global liquidity in 2018, led by a rapid pace of interest rate hikes by the Federal Reserve (Fed) of the Unites States (US). Narrowing interest rate differentials have led to slimmer risk premiums for investors in Asian emerging markets (EMs).
This drove capital flows away from the region and into US dollar-denominated assets. Capital outflows also resulted in depreciation relative to the US dollar, leading a number of central banks in the region to hike rates and to intervene in markets to defend their currencies. The Fed is expected to continue hiking rates in 2019, which could further aggravate outflows. Our index measuring relative vulnerability to outflows points to divergence in Asia.

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Corporate insolvencies in France: all good things come to an end

The third quarter of 2018 marks a turning point for companies in France: for the first time in two years, insolvencies increased by 2.3% compared to the same quarter of the year previous. This trend reversal is consistent with the slowdown in growth to 1.6% in 2018. As this decline in French growth can chiefly be attributed to household consumption, sectors such as personal services, food retail, and automotive have been the most affected by the rebound in insolvencies. At the same time, the slowdown in construction sector activity (27% of the total number of insolvencies) is also reflected in the recent rise in insolvencies. The trend is the same in personal services (which accounts for one insolvency per five).

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Could SMEs become the weak link in China’s economy?

When considering risk in the Chinese economy, a lot of the discussion has focused on large State-Owned Enterprises (SOEs), or large private conglomerates. However, headwinds impacting an understated group of smaller firms have the potential to be much more disruptive: Small and Medium Enterprises (SMEs) account for the majority of enterprises and a sizeable proportion of employment. However, the need to address financial stability risks associated with China’s vast corporate indebtedness – most of which has historically been associated with SOEs – has left SMEs scrambling to access financial resources to meet their working capital and long-term expansion needs.

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Wind Energy: How long will the wind stay in the industry’s sails?

Wind energy undoubtedly has a bright future, with many countries around the world eager to develop this source of power due to its affordable cost of production, its ease of use, and the abundance of wind. The rise of offshore wind, with an increasing number of turbine projects in the sea, seems to be the beginning of the creation of maritime energy infrastructures that will be able to benefit from the stronger ocean winds. Developing countries, with their restrained means, show a will to empower community with this kind of technology, helped by decreasing costs, access to funding, and the knowledge of advanced economies with a strong track record and more experience.

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UAE: A new place in new world trade?

The United Arab Emirates (UAE) has the second largest and the most diversified economy in the Gulf Cooperation Council (GCC). Thanks to authorities’ efforts to diversity exports over the last three decades, the share of the oil sector in GDP and in overall exports declined to 30% and 16% respectively in 2016 (compared with 43% and 76% in 2001). The country has become a regional hub for trade and logistics. This encouragement of new industries has helped the federation to increase its comparative advantage in sectors such as metals, minerals and plastics while also maintaining its competitiveness in oil sector. In order to promote economic integration and widen trade ties, the UAE has signed various agreements with many countries in economic, trade, investment, and technical fields. The strategic location of the country allows it to play a central role in re-exporting goods from different countries around the world towards Arab nations. Re-exports account nearly 60% of total exports.

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A New Deal of Cards for Emerging Markets

The past quarter has been marked by a continued rise in oil prices and capital outflows from emerging markets, fueling the depreciation of their currencies (see Graph 2, p. 4). The worsening currency crises in Argentina and Turkey this summer (which led us to downgrade their country assessments in the second quarter of the year) are emblematic cases.

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US Trade Protectionism: what are the knock-on effects on global value chains?

While policies to open up trade have been a standard feature since the creation of the World Trade Organization (WTO) in 1995, the 2008-2009 crisis proved a turning point. The crisis boosted protectionism, which then climbed to new levels with the arrival of Donald Trump as President of the United States. Since early 2018, the US government has kept its word on several of its threats in terms of trade protectionism by launching customs duties on imports for various products: solar panels and washing machines (January), as well as steel and aluminium (March, then in June for the EU, Mexico, and Canada, concluding with Turkey in August).

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Central & Eastern Europe Insolvencies:Good times come to an end

A favourable economic environment was not enough to reduce company insolvencies in Central and Eastern Europe (CEE). While average GDP growth accelerated to 4.5%, i.e. the highest level in nine years, insolvencies increased by 6.4%. This latter figure ends the improving trend in business insolvencies, which decreased in both 2015 and 2016. 2017 saw an increase in insolvencies proceedings in nine countries1 and drops in only five2. The regional breakdown indicates a wide variety of dynamics, ranging from a 27.1% decrease in insolvencies in Slovakia, through to a slight increase of 2.4% in Estonia and a surge of 40.1% in Croatia.

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Rising Political Risks Cloud Outlook for Asian Economies

Political risks in Asia have increased, according to Coface’s Political Risk Model. Asia currently ranks above the world average in terms of political risk, behind the Middle East and North Africa (MENA), Sub-Saharan Africa and Latin America. Although political risks in Asia have remained broadly stable relative to other parts of the world, some exceptions are notable. These risks could cloud the outlook for some economies going forward. Much of the systemic sources of political risk are related to the continent’s dynamic growth and existing social fragilities. It appears that most of the
increases in recent years have been due to rising political fragilities, associated with a proliferation of less democratic styles of governance.

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