Asia Country Risk Ratings

China (CHN)

China’s overall country risk score remains at medium, with the legal and regulatory risk remaining at medium high, and political interference at medium. Internationally, the summit between President Xi and Trump in S Korea has helped produce a trade truce, following China’s threats on rare earth minerals. Progress towards a U.S./China trade deal will remain slow however, with the effective tariff rate against China only now modestly above the EU/Japan levels, and with the U.S. seeking long-term trade commitments. This could jeopardize Trump’s proposed visit to China in April 2026. Even so, Trump is placing priority of trade rather than strategic restraint with China, and China will not want to fall out with Trump. The other main focus going into 2026 is the economy, with the new 5-year plan placing emphasis on turning new technologies into production reality. While the 2026-31 plan also mentions the importance of households to economic resilience, it remains unlikely that the government will launch a major cyclical handout for China’s consumers. Some strengthening of education, unemployment, health and pension structural safety nets will likely be seen, but these will likely be incremental and insufficient. Additional fiscal stimulus for 2026 is expected to be announced in March 2026, but may merely match the Yuan2.5trn seen in 2025. Meanwhile, a significant escalation with Taiwan remains unlikely in the next 1-2 years. China military forces are also not strong enough yet for such a high-risk military operation, while any U.S. involvement would increase the risks dramatically. Even so, China will keep up its gray-zone warfare with Taiwan, including large scale military exercises. Elsewhere, the exchange transfer risk remains at medium-high. A current account surplus, plus substantial FX reserves, helps to support this rating. The inability to provide fiscal stimulus remains at medium. China has room for extra fiscal stimulation should lower growth raise the risk of a hard landing in 2025 or 2026, while the dominance of domestic investors means that China’s authorities can persuade investors to rollover and buy new debt. Banking sector vulnerability has remained at a medium rating, despite worries about the long-term downturn in the residential property sector as the largest banks are seen as strong. Non-performing loans, primarily held by small and city banks, can be managed through potential takeovers by larger banks and local governments.

India (IND)

India’s political landscape over the quarter has been shaped by renewed consolidation of the BJP-led National Democratic Alliance (NDA), assertive legislative activity, and growing scrutiny of institutional independence. The NDA’s sweeping victory in Bihar’s November 2025 state elections—returning Nitish Kumar as chief minister—has reinforced the BJP’s national momentum and extended its influence in eastern India. Despite losses in earlier contests, the Bihar result has strengthened the perception of the NDA’s electoral resilience heading into the latter half of the decade. At the federal level, the government continues to operate with a narrow but stable majority. Legislatively, 2025 has been a high-intensity year. The Constitution (130th Amendment) Bill—addressing regional representation, language rights and federal balance—has dominated parliamentary debate. Other major reforms, including the National Sports Governance Act and the Jan Vishwas Bill, point to continued efforts to modernise regulatory frameworks. Simultaneously, the opposition has intensified protests over alleged electoral malpractice and concerns about the Election Commission’s neutrality, reflecting widening political contestation around institutional trust. India’s security environment remains broadly stable, despite sporadic terrorism risks concentrated in Kashmir and border regions. These incidents have not disrupted investor sentiment or economic activity in major cities. Externally, relations with Bangladesh have deteriorated following the death sentence handed to former prime minister Sheikh Hasina in November, heightening political tensions and complicating India’s regional diplomacy. New Delhi is expected to deny Dhaka’s extradition request, a stance that may strain ties further, amid rising Chinese influence in South Asia. Domestically, the government’s GST rationalisation in September—cutting rates on consumer goods, vehicles, essentials and insurance—has boosted sentiment and should support near-term consumption. Although the reforms entail revenue losses, higher tax buoyancy and better compliance are expected to mitigate fiscal risks. Worth noting though is that higher public spending to support growth can widen the fiscal deficit if revenues underperform, raising the risk of fiscal slippage versus the announced consolidation path and slightly weakening investor confidence in India’s ability to stabilise debt. This has marginally pushed up the perceived risk of sovereign non‑payment. Overall, India enters 2026 with a politically dominant ruling bloc, a fragmented opposition and a steady reform trajectory. Stability remains the baseline outlook, though debates over federalism, institutional independence and electoral credibility will increasingly shape the political landscape.

Indonesia (IDN)

Indonesia has entered a far more contentious phase in its political trajectory, with the last six months defined by sharp public unrest, cabinet volatility and growing dissatisfaction with President Prabowo Subianto’s first year in office. The most consequential development was the late-August to early-September 2025 protests, which erupted after parliament approved a dramatic increase in lawmakers’ housing allowances—roughly 20 times the minimum wage, which was then intensified further following the death of a motorcycle taxi driver during a police intervention. Although official figures differ, at least eight people died and thousands were arrested. The state’s response, including mass detentions and heavy-handed crowd control, has deepened anger across youth and civil-society groups, reinforcing a broader narrative of democratic regression. This has led to a risk rating of moderately high in the political violence category.  The administration’s political footing has also shifted. A sweeping September reshuffle removed five ministers—including Finance Minister Sri Mulyani Indrawati—amid criticism of economic management and Prabowo’s growing reliance on loyalists. These moves consolidated his authority but also narrowed technocratic influence in the cabinet. Relations within the ruling coalition remain complex: Jokowi’s influence endures through his son and vice-president, Gibran Rakabuming Raka, but calls for Gibran’s impeachment and Prabowo’s closer ties with PDI-P chair Megawati Sukarnoputri have weakened Jokowi’s hand. Gibran’s assignment to oversee development in Papua—an area marked by persistent conflict and human-rights concerns—is widely seen as political side lining. We feel social pressures are intensifying. Cuts to public works, university funding, and investment allocations—implemented to free fiscal space for Prabowo’s flagship programmes and expanded military role—have added to public frustration. Despite these strains, Indonesia’s formal political stability remains intact. Prabowo’s coalition still commands a broad, if looser, parliamentary majority, supported by major Islamic parties and conservative blocs. The exclusion of the PDI-P—the largest party—from cabinet positions has clarified the opposition landscape but also heightened parliamentary contestation. While we expect Prabowo to complete his term through 2029, his reduced coalition strength increases the risk of legislative gridlock and recurrent unrest. Overall, Indonesia is entering a period of heightened volatility.

Korea, Dem. People’s Rep.  (PRK)

North Korea’s overall risk level remains very high. Kim Jong Un remains the supreme leader of the country. Political violence, political interference and legal & regulatory risk remain very high. North Korea continues to improve their military system with multiple new weapons and has pledged to continue doing so. North Korea, is still a major ally of Russia and are supplying troops as well as arms in exchange for oil and technology transfers. However, North Korea has been suffering from food shortages, due to the UN’s sanctions over its weapons and several natural disasters, which have also led to them deepening their agricultural ties with Russia. High inflation has also been disruptive to the economy.  Meanwhile, the Trump administration has too many issues to focus on North Korea directly for now, but Trump still claims a good relationship with Kim Jong Un. In the coming years this could lead to new negotiations to freeze North Korea’s nuclear program at current levels. North Korea might also be willing to consider such an idea in exchange for recognition as a nuclear power, provided they receive U.S. financial support, though China, Russia and South Korea would be uncomfortable with this. Complete denuclearisation is unlikely to be agreed. Meanwhile, supply chain disruption remains high. Sovereign non-payment remains medium high and exchange transfer remains low. The risk of doing business remains very high in North Korea.

Lao PDR (LAO)

Lao PDR’s, located in the Southeast of Asia, overall country risk continues to be considered as medium high. Thongloun Sisoulith leads the Lao People’s Revolutionary Party (LPRP) and became the president of the republic in the January 2021 election. Lao has been ruled by a single party since the collapse of the monarchy in 1975. While an election is scheduled for February 2026; they are expected to have no impact on the current ruling party. Political interference is now considered high, while legal & regulatory risk remains high. Lao PDR maintains close relations with its neighbouring countries, in particular China, Vietnam and Thailand. Laos’ natural and human resources are geographically and economically accessible for its neighbours, particularly China, which holds significant control and leverage over the development and export of these resources due to its position as the largest investor. According to the IMF, GDP growth is forecast at 3.5% in 2025, while estimates predict growth to reduce slightly to 2.5% in 2026. Economic development has been mainly driven by neighbouring countries’ FDI, targeting the landlocked nations hydroelectricity, mining and infrastructure. For example, China’s infrastructure project of the Laos-China railway line in 2021, has reduced transport costs, improved efficiency and helping Lao PDR transition to a ‘land-linked’ logistics hub. The risk of doing business, however, is considered high, while fiscal consolidation means the inability of the government to provide stimulus is medium risk. Inflationary pressures are still apparent as the IMF forecast a rate of 7.8% in 2025, though the central bank lowered its policy rate down to 9% from 10.5% in August 2025. Additionally, the nation’s government debt to GDP still remains high, at a forecast of 90.7% in 2025 by the IMF. However, restrictive policy has directed debt into a better position, with the majority of obligations dominated by the USD. Sovereign non-payment risk remains medium high, while exchange transfer risk is considered medium due to the governments restrictive approach.

Macau (MAC)

Overall risk in the Macau, the special administrative region of China, remains medium low. Sam Hou Fai is the Chief Executive of the Macau Special Administrative Region, as head of state is President of People’s Republic of China, Xi Jinping. Political interference and legal & regulatory risk both are considered low. Macau’s economy is driven by its tourism industry as levels are currently on track to recover to pre-COVID numbers this year, enhancing the city appeal globally. In particular, Macau is one of the only regions in China where casino gambling is legal, which serves as a key driver to its economic growth, especially after the DICJ (Gaming Inspection and Coordination Bureau) reported October 2025 gaming revenues of USD 3.01 bln. However, the government of Macau is intent on diversifying its economy from being known as the gambling capital of the world. In 2022, the government secured a commitment of approximately USD 15 bln in investment from the companies operating casino resorts during their concession renewals. The deal agreed that around 90% should be provided to non-gambling amenities. Recently, however, Chief Executive Sam Hou Fai had acknowledged Macau’s imbalances regarding economic development and insufficient results regarding diversification, stating further efforts can be made to address these issues. The recent 2026 policy address features the limited results of non-gambling industries and reaffirms the idea of economic diversification. According to the IMF, GDP growth is forecast at 2.6% in 2025, a slight decline compared with previous years, while inflation remains low at 0.5%. The risk of doing business is assessed as low. Additionally, sovereign non-payment risk is regarded as medium, given that the IMF reports Macau’s government debt at 0%. Macau is essentially a debt free region with sustainable fiscal reserves, though tight political and economic ties continue with mainland China. Finally, the Macanese Pataca (MOP) remains pegged to the Hong Kong Dollar at a rate of HKD 1 to 1.03 MOP, and therefore indirectly pegged to the USD through the HKD. Banking sector vulnerability is considered medium high, while exchange transfer risk remains medium low.

Malaysia (MYS)

Malaysia’s political landscape over the past six months has been defined by cautious coalition management, intensifying social pressures, and a growing disconnect between reformist ambitions and political realities. Prime Minister Anwar Ibrahim’s unity government continues to project stability, supported by anti-party-hopping rules and an MoU binding coalition partner until 2027. However, the coalition—held together more by necessity than ideological alignment—has faced mounting internal frictions, with occasional threats of withdrawal from smaller component parties and heightened pressure from the Islamist opposition bloc, Perikatan Nasional (PN), especially PAS. These dynamics have complicated Anwar’s reform agenda, and left the government vulnerable to narrative attacks on issues of religion, identity, and cost of living. Public discontent peaked in July when Kuala Lumpur saw the largest protest since Anwar took office in 2022, driven by rising living costs, subsidy reforms and perceptions that promised institutional changes have stalled. Economic anxiety remains high: Inflation, income insecurity and household vulnerability dominate the public sentiment, even as Budget 2025—Malaysia’s largest—prioritises infrastructure, healthcare, welfare expansion and inclusive education. The rollout of expanded sales and services tax in May and a new dividend tax has sparked debate, while tighter targeting of fuel subsidies has drawn mixed reactions from lower-income groups. Social cohesion has come under a renewed strain. Rights groups have criticised the government for expanding digital censorship, deploying wide-ranging legal provisions against activists, and sustaining state-sponsored anti-LGBT policies. Crackdowns on refugee and stateless communities—including the Bajau Laut—have drawn international censure. Despite these pressures, the government retains a functional working majority. Relations between Pakatan Harapan (PH) and Barisan Nasional remain pragmatic, as neither stands to gain from destabilising the coalition. Nonetheless, compared with the turbulence seen in neighbouring Thailand and the Philippines, Malaysia’s political environment remains relatively stable, underpinned by coalition discipline, legal safeguards against defections, and the absence of credible alternatives capable of forming government.

Papua New Guinea (PNG)

Overall risk continues to remain medium high in Papua New Guinea. Prime minister, James Marape, has served as Prime Minister since May 2019, while the next parliamentary election is not expected until July 2027. Legal & regulatory risk remains high, while political interference has been upgraded to a medium high-risk rating. Australia and PNG had come to an agreement and signed a new defence agreement, allowing either country to come to each other’s aid if attacked, as the Australian capital is seeking to block China from expanding their security influence in the region. According to Marape, relationships are to be retained between PNG and China. Furthermore, U.S. president, Trump, had confirmed a tariff rate of 15% for PNG. Political violence is also unchanged at medium high. Violence has disrupted the highlands region for a long period, especially in relation with tribal conflict. Advancements in technology, modern weaponry and political interference has collectively intensified tribal conflict.

In terms of the economy, GDP growth has not seen much change since the previous quarter, with an IMF forecast of 4.7% in 2025 and an estimate of 3.5% in 2026. Natural resources-based industries contribute the most to growth, including agriculture, forestry, mining and extraction of natural gas. In addition, inflation is projected to reach 4.8% in 2025 according to the IMF, although is predicted to reduce to 4.6% in 2026. The risk of doing business remains high due to a high-cost operating environment, but also the persistent security issues surrounding the region. Government debt is seen to be on a downward trend, currently forecast at 50.4% of GDP in 2025 and estimated to further decline to 50% in 2026. Exchange transfer risk and sovereign non-payment risk have both remained at medium high. Finally, PNG had faced earthquakes in both July and August 2025, reaching a magnitude of 5.9, which in the past have caused major landslides, deaths and damage to infrastructure.

Sri Lanka (LKA)

Sri Lanka’s overall political risk level is moderately high, given the recent years’ political violence and the change in government in 2024. Nonetheless, the country is undergoing change. Sri Lanka’s political environment has been reshaped by the rise of the National People’s Power (NPP) coalition, who’s historic 2024 landslide ended decades of two-party dominance and ushered in a period of relative stability after years of crisis. The administration under President Anura Kumara Dissanayake continues to enjoy a secure mandate, but the last six months have revealed the limits of its reform momentum and the early signs of political fatigue. Despite sweeping campaign promises—ranging from a new constitution and deep devolution to the repeal of the Prevention of Terrorism Act—the government has moved cautiously, prioritising its Sinhala-Buddhist base and avoiding steps that could inflame resistance from influential domestic actors. Anti-corruption drives, publicised prosecutions of figures from previous regimes, and the creation of an Independent Prosecutor’s Office have signalled intent, but systemic change has been uneven, with constitutional reforms left unfunded in the 2026 budget. The NPP’s setback in the May 2025 local elections suggests a tapering of its electoral honeymoon rather than a fundamental erosion of support. Public criticism has centred on governance shortfalls and slow follow-through on transparency and institutional reform. Social pressures have compounded these political stresses. Broader socioeconomic vulnerabilities—persistent poverty, food insecurity and uneven recovery from the 2022–23 crisis—continue to shape public sentiment and perceptions of government performance. The core risk to stability remains economic. While some macro indicators have improved (including economic growth, stabilising inflation and progress on debt restructuring), living standards for most Sri Lankans remain strained. If tangible improvements do not materialise in the coming quarters, political frustration could resurface, eroding the NPP’s political capital. Nonetheless, the administration’s large parliamentary majority and unified executive-legislature structure should ensure broad stability.

Taiwan (TWN)                                   

Taiwan’s overall country risk score of medium-low reflects economic strength and only ongoing, rather than acute tensions with China over reunification. One key near-term uncertainty is Taiwan’s relationship with the Trump administration, given the lack of progress on a trade deal and President Trump’s focus on trade rather than strategic issues. While Taiwan has promised more U.S. imports, plus increasing advanced semiconductor production in the U.S., a trade deal is yet to be secured.  President Trump’s aversion to war could also see less commitment to helping defend Taiwan in the future. One key question is whether China hawks within the U.S. administration will persuade Trump to keep the strategic ambiguity policy. On balance the strategic ambiguity policy will likely be maintained by the U.S. Tensions in the Taiwan parliament remain, with KMT electing a pro-China leader (Cheng Li Wun) in October. Prolonged troubles for the DPP passing legislation are the likely prospect for the coming quarters. China also maintains the persistent military exercises as part of China’s gray-zone warfare. However, we feel that President Xi is unlikely to agree an invasion in the coming years. both as China’s military build up to 2027 continues and the risk of failure would be high if the U.S. became involved – particularly given U.S. superiority in submarine capabilities (U.S. aircraft carrier superiority could be counted by China’s large ballistic missile stocks). Thus, China will likely continue to pressure Taiwan but stop short of major escalation. Elsewhere, structural economic indicators remain strong, helped by a well-balanced economy, controlled inflation and a huge current account surplus. This leaves exchange transfer at a low rating, while the risk of doing business also remains low risk. Risk of sovereign non-payment is reduced from medium-low to low, which reflects the low government debt/GDP trajectory. 

Thailand (THA)

Thailand has experienced one of its most unsettled political periods in recent years, marked by rapid leadership turnover, fragile coalitions and rising public frustration, translating into a moderately high overall risk assessment and a high political violence risk assessment. Three prime ministers have come and gone since mid-2025, with Anutin Charnvirakul of the Bhumjaithai Party (BJT) taking office in September after the Constitutional Court dismissed Paetongtarn Shinawatra for ethical violations linked to a leaked call with Cambodia’s former leader. Anutin heads a minority coalition that secured support by promising early elections after passing the 2026 budget and agreeing to limited constitutional reforms. His premiership rests on an uneasy understanding with the People’s Party (PP)—the successor to the dissolved Move Forward Party—which demanded a timeline for dissolution of parliament and progress on political reform. Despite this arrangement, reformist movements remain constrained. The judiciary’s ten-year ban on Move Forward leaders has side lined the country’s most popular reformist force, reinforcing the influence of the conservative–military establishment. Anutin’s long-standing ties to the military mean that major shifts—especially on lèse-majesté and the military-drafted constitution—are unlikely. Tensions with the PP over the pace and scope of reform will likely persist, and coalition realignment remains possible ahead of expected elections in early 2026. We think coup risk is low for now, as the army prefers to avoid intervention amid heightened border tensions with Cambodia. Social unease is intensifying. Household debt is at record levels and inequality and generational divides have deepened. The government has attempted to ease pressures through co-payment schemes and debt-relief measures, while also advancing a landmark marriage-equality bill. Yet concerns over civil liberties, freedom of expression and the long-running insurgency in the deep south persist, reinforcing a widespread sense of insecurity. External pressures further complicate the outlook. Border clashes with Cambodia in July killed scores on both sides, triggering severe trade disruptions, the return of nearly 1 million Cambodian migrant workers, and a sharp contraction in border commerce. A joint declaration in October, witnessed by the U.S. and Malaysia, briefly offered hope for de-escalation, but a November landmine blast that injured Thai soldiers led Bangkok to suspend the agreement. Tensions remain high, and meaningful progress on demarcation is unlikely without renewed international mediation. Overall, Thailand remains at a political crossroads. Leadership churn, coalition fragility and unresolved structural divides between reformists and entrenched conservative forces will likely keep political uncertainty elevated through 2026.

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