Sri Lanka turmoil highlights risk for Chinese firms investing overseas
- Mass protests forced the country’s president Gotabaya Rajapaksa to flee and analysts warn that other countries may face greater unrest in the coming months
- Risk analysts say Chinese firms must stay on top of local political developments when doing business abroad
Chinese companies operating overseas need to prepare crisis management plans in case of social unrest and political turmoil in these developing countries, according to Chris Torrens, a partner at the consultancy Control Risks.
“Sri Lanka is a reminder of the need to have effective crisis management plans in place and regular exercises or training to ensure that everyone knows what to do,” Torrens said. “Scenario planning is also essential as part of this process.”
There have been growing concerns that the Sri Lanka-style chaos will occur in other highly indebted developing countries, for example Pakistan, where high inflation and prolonged power cuts prompted people to take the street in Karachi last month. At least one woman died in clashes between police and protesters.
“Investors may need to take into account the capacity of domestic governance when investing overseas particularly when the international environment is not doing well,” said Lin Minwang, a professor of South Asian studies at Fudan University in Shanghai.
