Gaddafi did not trust the Libyan army and relied on foreign mercenaries and international bodyguards, Williamson said.

Analysts said the instability in Libya and other countries in North Africa and the Middle East would hurt China's interests in the short term, but in the long run China would be an economic force in the region.

Unrest has swept across the Middle East and North Africa. Demonstrations began in Tunisia in December, resulting in Tunisian president Zine el-Abidine Ben Ali fleeing the country on January 14. Late last month, protests began in Cairo against Egyptian president Hosni Mubarak, who resigned and fled Cairo on February 11. Amid fighting in Libya, Gaddafi looks likely to share a similar fate. Demonstrations have also broken out in Bahrain and Yemen.

At stake for China is its reliance on the Middle East and North Africa for most of its oil imports as well as billions of dollars of investment by Chinese state firms in infrastructure and oil projects in the region.

In the short and medium terms, Williamson said, there was a risk of anti-Chinese sentiment and possible violence against Chinese nationals in North Africa. 'There are some attacks against Chinese nationals and business interests, although it is unclear if this is xenophobically motivated,' he said.

Michael Ackerman, president of the Ackerman Group, a US risk consultancy, said the insurgency in Libya had not shown any signs of xenophobia against Westerners or Chinese.

'If xenophobia were to develop, it would almost certainly be directed at Westerners, not Chinese,' he said.

But Libya, which is largely tribal, could be on the brink of a devastating civil war which would affect oil prices, Ackerman warned.

Barry Sautman, associate professor of social sciences at Hong Kong University of Science and Technology, said the eastern part of Libya, the country's main oil producing region, had fallen to rebels.

Libya accounts for only 3 per cent of China's oil imports, but Sautman said the north African nation's dwindling exports were pushing up oil prices in international markets. 'It will take quite a while before Libya's oil production gets back to normal,' he said.

The price of Brent crude oil futures for April rose from US$102.50 per barrel on February 18 to hit US$119.79 per barrel on Thursday, its highest level in 21/2 years.

The revenue and profits of Chinese infrastructure projects in North Africa, including Libya will be hurt, Sautman said. 'Huge numbers of skilled Chinese workers in infrastructure and petroleum projects have been evacuated,' he said. 'Who knows when they will be back?'

Infrastructure projects were paid according to their progress so any delay would hurt revenue, Sautman said.

Chinese state-owned enterprises have more than US$14 billion worth of infrastructure and oil projects in Libya, including CRCC's 352 kilometre coastal railway and 800 kilometre north-south railway - worth a combined US$2.6 billion.

CRCC, listed in Hong Kong and Shanghai, halted all its projects in Libya, manager Yu Xingxi said.

He said the state-owned enterprise had more than 3,000 Chinese staff in Libya and because it would be difficult to evacuate so many workers it was not sure how many would leave the country.

Libya is the North African country where CRCC has the most workers and largest projects. CRCC has a smaller number of workers in Algeria, where it is involved in railway projects and the 1,216 kilometre East-West Highway.

In Egypt, China National Materials (Sinoma), a Hong Kong-listed cement company, employs more than 1,000 people who are building two cement plants. The recent Egyptian unrest had no major impact on Sinoma's cement plant projects, as they were six hours' drive from Cairo, the main theatre of protest, a Sinoma spokesman said.

Ackerman said the outcome in Egypt had been the best that could be hoped for because the army had remained cohesive and had been able to maintain order.

In reaction to the unrest in various North African nations, Chinese companies initially pulled senior staff out of the region, but were now considering sending staff back, especially to Egypt, said Ben Simpfendorfer, managing director of China Insider, an economic consultancy.

North Africa was a major market for China, he said, with more than 35 per cent of China's exports to the continent destined for North Africa.

'So the change in North African governments creates commercial opportunities, especially for Chinese construction companies,' he said.

For instance, the new Egyptian government remained committed to a market economy and was expected to accelerate infrastructure spending. With Western companies expected to be cautious about sending employees back to the region, Simpfendorfer said opportunities would be created for Chinese companies to fill the gap.

Liu Wensheng, chief economist at China Communications Construction, China's largest port construction firm, said the impact of the Libyan unrest on Chinese companies should not be great because China had friendly relations with Libya.

'China's relations with Libya should be stable whatever happens,' Liu said.

The Hong Kong-listed firm has more than 1,000 Chinese employees in residential and road construction projects in Libya.

Williamson said one of China's key competitive advantages, which had helped it gain a foothold in Africa, was its policy of non-interference in the affairs of governments on the continent. 'China has not wanted to be overtly critical of ongoing events, as it wants to keep leaders on its side,' he said.

Williamson said the Chinese had been slow to publicly criticise Gaddafi's government for its aggressive crackdown on protesters, which the colonel likened to the Tiananmen Square crackdown in Beijing in 1989, in contrast with the United States, the European Union and the United Nations.

'In the longer term, whether China will be punished for this is probably doubtful,' he said.

Chinese investments in Libya are already significant and the need of any Libyan government for oil revenues would probably overshadow concerns about China's relationship with Gaddafi, he said.

'Ultimately, China's focus is on oil,' Williamson said. 'China will likely rearrange its policy and court whoever ends up in power.'

However, Mark Sorbara, an associate at Africa Risk Consulting, said the triumph of people power in North Africa would see its governments and citizens - keen to address local youth unemployment - question mainland companies' use of Chinese workers.

Chinese companies might have to become more transparent in their dealings with North African leaders. 'Democracy means increased transparency,' Sorbara said. 'Chinese companies will have to move towards transparency in their business dealings, just as elites in North African countries will be forced to.'

Threat to business

Revenue and profits of Chinese projects in North Africa will be hurt

In Libya, Chinese state-owned enterprises have infrastructure and oil projects worth more than, in US dollars, $14b