I'm Paul Maidment. This is Notes On The News. Time for investors to consider the political risks in China. They are two and they are connected. First, for all its economic reform since 1979 and pre-global recession vibrancy of its export sector, China remains a command economy. It forced a reaccelerating of growth through massive government stimulus, not alone in that, but it thawed the credit freeze simply by ordering its state-owned banks to lend. But much of the money is going on roads and rail lines to nowhere.

Big project spending is something command economies are good at. They are less good at getting a return on their capital. As our occasional contributor John R. Taylor at FX Concepts points out, China's economic success over the past three decades came in part because its central planners outsourced to the likes of Wal-Mart and Carrefour the decisions over what to make that would be most profitable to export. But now the Western consumer is broke. The central planners are adrift once more.

And the second point is that his is all happening when the country's top leadership is going into a succession battle; President Hu Jintao and Prime Minister Wen Jiabao are due to step down in 2012. Though this is being fought out far from the public eye, what can be made out is showing unexpectedly deep divisions between various factions within the Party, army and bureaucracy, with a particular rift between economic reformers and those who see economic management as part of national--and Party--security.

The Hu-Wen leadership's ability to pass the reins to their preferred successors depends in large part on their handling of the economy, particularly in the socially volatile countryside where environmental degradation and pollution are exacerbating rural poverty. The traditional way to deal with that is to pour money on troubled waters. State spending on political, not economic, grounds allied to what looks to be an ugly succession battle should give even long-term China bulls reason for short-term concern.

For the Forbes.com Video Network, this is Paul Maidment with this Note on the News. Prosper well.