Credit Risk in Emerging Asia at a Contained Level

Credit risk in Emerging Asia is at a contained level as three-quarters of the analysed sectors present a moderate or medium risk, according to Coface.


Coface says the region is characterised by constant growth in corporate turnover, between 4% and 16%, depending on the sectors.


Pharmaceuticals is benefiting from the growing middle classes in India and in China, both markets also new major players in the manufacture of active ingredients for the pharmaceutical industry.


Within the energy sector, the solar segment is affected by the fall in panel prices and has as a result seen its credit risk increase.


The textile-clothing sector also needs to be watched, particularly in China, due to the relocation of production towards lower-cost countries.


The retail sector which is undergoing great changes following the boom in e-commerce (with turnover having almost doubled in 5 years), has started its transition towards a hybrid economic model, combining the advantages of the two business models.


However, this business model convergence turns out to be a source of additional risk for companies in the sector, says Coface. In the future, players must demonstrate responsiveness and adaptability. Traditional distributors need to introduce both multi-channel and cross-channel systems, to optimise the management of both their stock and their store areas. However, faced with growing competition, risks also need to be monitored among the pure e-commerce players, who must rely on the support of solid backing groups for financial consolidation.