Acute and chronic risks threaten China’s stability

Outlook

Temporary risks resulting from purely political circumstances will recede once critical events are past. China must also navigate critical transitions successfully before negative consequences of current trends become overwhelming. Other negative trends are virtually inexorable and will only become more difficult to adapt to as time passes.

Then there are risks that are unavoidable and ever-present arising from the international order or the nature of the Chinese state and society. In these cases it is resilience that matters most, and this will depend on how well China manages the risks in the other categories.

Impacts

• Xi’s replacement of collective leadership with one-man rule makes him vulnerable if signature policies fail.
• Over-reach in expanding the Belt and Road would put debt-induced financial strain on China as good money gets thrown after bad.
• Countries feeling threatened by China’s rise could cut off its access to advanced technology to undermine its economic development.
• Failure to clear the middle-income trap would undermine the Communist Party’s legitimacy.