China Monthly Strategic Risk Review

Context

The cumulative effects of the weakening of democracy in the United States, the health crisis, climate change and the war in Ukraine, with its multiple consequences (on energy, food, supply chains, etc.), are undermining global geopolitical and economic stability. Each country is suffering the consequences on its soil and at the international level plays a more or less contributing role in the return to a certain balance.

In this unprecedented context of merging national and international agendas, the notion of “country risk” must be revisited. It must now simultaneously reflect the effects of both domestic and external action by governments and states.

Approach

This new global approach to country risk, a tool traditionally designed to assess investment risks, is particularly relevant for the People’s Republic of China, which has reached an advanced level of interdependence and influence with the world through a policy of “reform and opening up” over the past 40 years.

Also, unlike a classical monitoring that limits itself to evaluating uncertainties, and thus the mere materiality of risks, we add the notions of intentionality (upstream) and impact (downstream), which may or may not be under control, but both are markers of the action of the Chinese strategic state.

According to this approach, China’s policy may be a risk for itself, including but not limited to its economic performance, but it may also pose a risk to the world economy. The fact that China knows how to control its internal risk can, moreover, take on several meanings. In addition to maintaining social stability, it may reflect a desire for greater control over its population, departing from the democratic standards to which foreign companies in partner countries must conform.

Similarly, its action at the international level, or within international and multilateral organizations, can be qualified as pro-active and contributing to the maintenance of the existing order, but it can also play a destabilizing role. Only a continuous and global monitoring of the very intentions of the CCP leadership and their effective impact on the ground, can identify the severity of the Chinese risk and anticipate the regime’s future evolution.