SVA – Alert for Foreign Business operating in the PRC – Protests and Possible Consequences
28 November 2022
A deadly fire in Urumqi, causing at least 10 fatalities, has become the catalyst for a series of protests on 25, 26 and 27 November 2022 against Covid restrictions in major cities across the People’s Republic of China (“PRC”).
The protests
The protests started in Urumqi in Xinjiang on 25 November 2022, but spread over the weekend to many cities including, but not limited to, Shanghai, Beijing, Guangzhou, Wuhan, Zhengzhou and Chengdu. The number of demonstrations grew quickly, highlighting the degree of popular frustration felt at the government’s “zero-COVID” stance.
Students at several universities rallied. Demonstrators called out slogans such as: “No more lockdowns, no more PRC tests”; and similar phrases were daubed on the walls at the Peking University’s canteen. Other protesters held up blank pieces of paper, apparently symbolising a lack of freedom of speech.
Police in Shanghai, amongst other locations, responded. A number of demonstrators were seen being taken away. A series of investigations into the origins of the protests are now likely under way. In this context, any involvement by outsiders, will be depicted as provocation by “foreign or external forces”.
Media response
Major Western media organisations, and the Taiwanese press, have highlighted what they perceive to be the seriousness of the protests, emphasising how some groups are calling for the PRC leadership to scale back its zero-COVID stances and in some instances to stand down.
Either way, SVA assess that the current demonstrations are highly unlikely to be successful and rather will likely result in large-scale arrests, notwithstanding the PRC authorities’ relatively subdued response to the unrest to date. Targeting of instigators will likely follow the subsiding of initial rallies.
What to do
SVA’s assessment is that foreign firms in the PRC should maintain a low profile, and under no circumstances become involved in any form of support for demonstrations. Observers should not underestimate the sensitivity of this issue to the leadership and should be aware that perception of outside involvement would allow for claims of provocation by “foreign forces”.
In addition, foreign companies should caution their expatriate employees against involvement, so as to protect staff. If the protests continue, there is a risk that the authorities could resort to much more robust tactics. Moreover, subsequent investigations will focus on those who posted on social media in support, or otherwise expressed sympathy.
In this context, we would note:
• Businesses in the PRC should anticipate a strong response from the authorities, in both the near, and medium, terms. Businesses should refrain from involvement, and caution foreign employees staff against attending protests, in anticipation of the risk of implementation of crowd-control and other measures.
• Companies should prepare for the closure of key roads and transport links, in association with such action. Such actions could result in disruption in various locales, such as Shanghai, which may affect supply chains. Companies should take account of reliance on key inputs or logistics hubs (such as ports, railheads, and airports) in this context.
• Companies should develop redundancy within communications systems. It is possible that a communications blackout will accompany any action against protesters. Companies should ensure they can minimise disruption to operations in such circumstances.
• Executives and staff should refrain from press or media comments about developments in China. Companies need also to be conscious that comments on internal media, such as email or message services, by staff could affect both the individual and the business, in the context of subsequent measures by the authorities.
• Companies should strengthen oversight of social media channels, so as to avoid the publication of comments (deliberate or otherwise) that result in a response against the business. Such measures would alleviate the risks of being perceived as partisan.
• Companies should re-assess existing contingency plans, to take account of protests and crowd-control measures, and other security risks, going forward. These plans should include measures for the offsite handing of key operations, as needed, or of restructuring regional operations.
• Senior executives should lead on the above measures aimed at protecting the business, rather than leave implementation to less experienced human resources or administrative staff.
SVA
SVA (
www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.
