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18.123. Political environment risk

The political environment is the main source and is kind of more complicated source of risk. The risks related to politics include political stability, democratic decision-making, transparent government management and supervision. The different regulation system comes with different attitudes and relative policies towards business.

In an unstable politics condition, people are unable to make correct predictions on future economic development. The fixed assets investment like real estate investment will be constrained within a limited level. Consequently, the real estate business will be reduced, and the real estate investors’ opportunity to gain profits will be small. More seriously, once there was a war, it will bring a death-blow to the real estate market. When the war broken out, the building will be destroyed in a sudden, the real estate price will go down calamitously, and no one would like to continue any real estate construction: the whole real estate market has to be stuck in the “ice stage”. However, in modern society, the war risk is small to the real estate investment. In China, the present political environment are stable, the risks which brought by the political environment are small, few Chinese real estate investor will consider the political environment risks.