Via the Opposite End of China, the Economist Intelligence Unit looks at political risk in China. And, in spite of the recent stories of rising protests and increasing ‘mass incidents,’ the EIU says the risk of a coming collapse is low to moderate under four different scenarios.:

Mishandling of protests in Hong Kong destabilises the Chinese leadership (Low Risk)

The Chinese government accepted the resignation of Hong Kong’s chief executive, Tung Chee-hwa, in March 2005. Mr Tung’s unsuccessful attempts to force through unpopular national security legislation in 2003 had prompted demonstrations attended by several hundred thousand. The appointment of a new chief executive, Donald Tsang, previously a leading civil servant, eased tensions, and pro-government parties did well in September 2004 elections for the Legislative Council (Legco). However, Mr Tsang’s plans for electoral reform were voted down in December 2005 by pro-democracy parties, who wished to see a faster move towards universal suffrage. The Chinese government has ruled out early moves towards full democracy, and there are fears that clashes between China and Hong Kong politicians over democracy in the territory could have repercussions for political stability in China as China’s leadership struggles to reassert its authority. (image here)

Local protests broaden into a wider movement (Moderate Risk)

Local protests will continue to be sparked by a number of issues including lay-offs, failure to pay workers, environmental pollution, corruption and illegal seizures of land. The local government’s failure to properly compensate peasants for seized land was, for example, the cause of recent protests in Shanwei, in Guangdong province, in which several demonstrators were shot dead by police. To date the government has faced down such protests by addressing some of the complaints raised and arresting most of the leaders, but this tactic may not be so successful in the future. The size and number of protests appears to be growing, and the spread of mobile phones has made organisation of demonstrations easier. (image here)

The continuing political transition results in a struggle for power or policy paralysis (Low Risk)

Major shifts in the balance of power are unlikely, and would only occur in the context of a specific controversy (for example, the mishandling of a major health crisis or a collapse in growth could prompt a realignment of power). While most factions within the CCP seem to support the current policy stance, businesses should be aware that the emphasis of policy could change if such a shift occurred. (image via here)

Further disease outbreaks occur, creating public anger and leadership disunity (Moderate Risk)



The growing risk posed by bird flu has been recognised as one of the key threats to China’s strong economic growth rates. The World Health Organisation (WHO) has noted that bird flu appears to be widespread among the country’s poultry population, and outbreaks have occurred in numerous provinces in 2004-05, both among wild birds and among birds raised domestically and commercially. If these outbreaks spread they could devastate the country’s poultry and egg industries, which are among the largest in the world. … This category of risk is also increased by the partisan nature of the press, which can be relied upon to suppress facts deemed unhelpful to the party leadership. Companies should consider establishing contingency plans to cope with a potential health crisis that could render a large proportion of employees ill or disrupt logistics systems. (image via here)

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