As President Trump continues his war of words with Kim Jong-Un it seems that China is growing more concerned about potential military action. While many were surprised to see Chinese President Xi Jinping talking so candidly with Donald Trump, it would appear that a non-military resolution could be on the cards. For many years now China has been perhaps the only ally of the North Korean authorities but with China’s influence apparently waning it seems that now is the time to work with the USA to bring about peace in the region.
United Nations resolutions and the Korean crisis
The United Nations Security Council has passed a number of resolutions aimed at bringing to an end the Korean crisis. In years gone by these resolutions have not always been followed to the word but now it seems that China has had enough. The USA and China have agreed to maximise pressure on North Korea through “vigourous enforcement of United Nations Security Council resolutions”. It is ironic that problems with North Korea could well bring the USA and China closer together.
Trump plays poker
Donald Trump is obviously a man who likes to play poker and gamble a little when you bear in mind his constant prodding of Kim Jong-Un over the last few weeks. Aside from the fact that the North Korean leader does not need too much provoking, Donald Trump has not exactly been a wallflower. Only a few days ago there were indications that the USA was seriously considering a military strike unless the North Korean nuclear missile program was brought to a swift end.
You only need to look at stock market around the world to see what experts believe will happen in the short to medium term. Nobody is pricing in any military action because inevitably, now that North Korea has a nuclear armoury, this would be a very short lived battle. The likelihood is that China along with the USA will cut off the supply of goods and potentially oil to North Korea until it abides by United Nations Security Council resolutions. In reality North Korea may well have a nuclear arsenal but the USA could literally wipe out the country in a very short space of time.
De-risking markets
There was a time just a few weeks ago when the market was pricing in major problems in the Far East and potential military intervention in North Korea. Surprisingly, as Donald Trump’s comments become more provocative, the markets seem to be taking less notice and are going through something of a de-risking phase at the moment. It will be interesting to see how cooperation between the USA and China develops because this could be the start of a blossoming relationship after a number of false starts.
If you are ever concerned about military action or major events overseas all you need to do is look at how stock markets are reacting and the dollar on currency markets. Whether investors feel they have the measure of Donald Trump and his “empty promises” is debatable but if you look at stock markets around the world there is little real concern.