As Rana noted yesterday, investors (and anyone concerned about the future of China) should watch the Uighur unrest carefully, even though it's happening in an economically isolated, far western province of the sprawling country. She drew a link between autocracy and growth. Here's another reason to pay attention: Mexico. It was, after all, the 1994 Chiapas uprising that caused foreigners to pull their money out of the country, leading to a painful currency devaluation and a severe recession. The effect wasn't immediate. As the Latin America expert Andres Oppenheimer writes in his book on modern Mexico, Bordering on Chaos, the Chiapas situation simmered for a bit until an emerging-markets investor from San Francisco visited San Cristobal, decided she didn't like what she saw, and recommended pulling money out of the country. That was the first domino that led to an international collapse.
China is, of course, in a much better macroeconomic position than Mexico was in 1994, and has strict controls on capital flows into and out of the country. China's weaknesses, as Rana explains, are in the political sphere. Beijing has gotten better at controlling the occasional ethnic clashes, and is even making a concerted international PR effort, but there could one day soon be a conflagration that erupts into something Beijing can't control.
