Evaluation and management of political risks in China's bot projects

The potential slowdown of the economic growth in China has led the governme nt to increase spending in basic infrastructure such as roads, ports, and p ower generation facilities. There are opportunities in the infrastructure s ectors for foreign investors: It is important however to identify and manag e the unique or critical risks associated with investments in China's infra structure projects. Such issues have received special attention with the cl osure of the Guangdong International Trust and Investment Corporation in 19 98 and the subsequent confusion over government support and guarantees. Thi s paper is based on the findings from an international survey on risk manag ement of build-operate-transfer (BOT) projects in developing countries, wit h emphasis on infrastructure projects in China. It discusses specifically t he criticality of the political and force majeure risks. Based on the surve y, the following critical risks, in descending order of criticality, are id entified: Chinese Parties' reliability and creditworthiness, change in law, force majeure, delay in approval, expropriation, and corruption. The measu res for mitigating each of these risks are also discussed.