risk refers to government interference in the business affairs of
foreign persons or companies doing business in a particular country.
The type of interference can range from outright nationalization
of industries through asset confiscation, and on to contract repudiation
with respect to contracts with government entities or government
In the US, a
stable government with known rules and regulations is presumed.
This is not necessarily the case in all parts of the world, and
China is particularly hazardous with respect to political risk.
The possibility of nationalization of industries needs to be considered
– in fact this has already occurred in China (in 1949). Similarly,
there are the risks of confiscation, expropriation, currency inconvertibility
and contract repudiation. Currency devaluation and rampant inflation
are possible scenarios in many countries (although they don’t
seem likely in China at the present time), wreaking havoc on the
adequacy of insurance limits, as one of many potential problems.
There is also risk to company employees of personal harm or kidnapping,
and risk to the firm of extortion attempts.
A unique form
of political risk occurs in China, and this is the constant battle
between the country’s central government and the provincial
and local governments over applicable law, and observance or non-observance
of it. This makes it difficult for companies operating in China
to know exactly what the rules are. The concept is captured by the
Chinese saying: "The mountains are high and the Emperor is
We will keep
your aware of the ever-changing political risk situation, help you
navigate through it, bring to you our network of professionals on
the ground in China including Hong Kong, and advise when and how
political risk insurance may provide solutions.
talks capitalism, but breathes socialism…
Karl Marx believed that socialism presupposes capitalism; in other
words, that society has to undergo capitalist transformation before
the correct conditions for socialism can exist…. An economy
containing privately owned businesses is just one of those things,
like adolescence, that one has to go through. How long will this
capitalist phase last?”
G. Chang, author of The Coming Collapse of China