"WHY CHINA KEEP US AT NIGHT?"

China bestrides the world of political risk like a colossus. Many experts tout it as the great invesment opportunity of the new millennium, but it is also a great unknown, Among the questions political risk analysts are studying: Can China´s explosive economic growth survive its corrupt and inefficient political system?

China´s continued expansion depends on the central government´s capacity to handle complex economic transactions and avoid instability. At the same time, the state must juggle huge security, demographic, and political challenges. Imminent agricultural, banking, and urban policy reforms will probably produce even more complex management problems for the countryps dysfunctional bureaucracy.

China appears to be inching toward instability as reforms strain the relationships between national and regional leaders, increasing the probability of an economic shock followed by a political one. Complicating matters, China´s bureaucracy laks the administrative control necessary to modulate the pace of an economic slowdown.

Analysts of economic risk tend to base projections for China´s growth rates on its past performance. But there are few countries for which past performance is so poor a predictor of future results. With a few notable exceptions, such as the 1989 protests in Tiananmen Square, social unrest is modern-day China has been rare. But the risk of popular unrest is going up as a result of widening income inequality, slowing economic growth, and continuing official abuse and corruption.

The urban unemployed and migrant workers could stage protests; rural rebelion over land reclamations and onerous administrative fess could escalate.

China´s leaders might then clamp down on the media, religious groups, use of the internet, and other forms of expression and communication.

The probability of such events occuring in the short-term is low, but China´s risk indicators suggest it is rising.

By: Ian Bremmer. Harvard Business School. "Managing risk in an unstable world"

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