Asian markets should guard against Washington’s unilateral sanctions on Pyongyang

By Hu Weijia Source:Global Times Published: 2017/8/9 22:08:39

More than 170,000 residents of Guam were shocked to wake up on Wednesday to the news that they might be affected by the US-North Korea conflict. Investors across the Asia-Pacific region also felt a chill.

Risk aversion dominated the financial markets after Pyongyang said that it was considering plans to attack the US territory of Guam, with most Asian indexes coming under pressure during morning trading.

Countries in the Asia-Pacific region will need to guard against increasing volatility in asset prices as well as capital outflows, while being alert to  possible financial chaos resulting from further unilateral sanctions on Pyongyang from Washington.

The size of the US' financial markets, as well as its globally competitive financial institutions, ensures the US' dominant position in the global financial architecture. We cannot rule out the possibility that Washington may take advantage of its financial position to further isolate North Korea from the international community. At the end of June, the White House said that it would bar the China-based Bank of Dandong from the US financial system for alleged dealings with Pyongyang. That statement came even though all Chinese banks have reportedly suspended remittance business with North Korea since 2016.

The highly controversial case is just the tip of the iceberg in US efforts to take action against individuals, financial institutions and companies that Washington believes are "providing assistance" to North Korea. The US' financial influence offers the possibility for the unlimited expansion of unilateral sanctions, whose potential side effects deserve attention.

Fearing the possibility of tougher sanctions, some investors have accelerated the transfer of their assets from Asian markets, a situation that will increase capital outflows from emerging economies in the region. Capital inflows to the US from emerging economies clearly represent good news for US President Donald Trump, or anyone else who wants to bring jobs back to the US and reinvigorate the nation's manufacturing sector. People should keep a wary eye on whether the US will deliberately create problems by taking advantage of its financial influence. US-based financial institutions should also be given special scrutiny so they don't benefit themselves, or help US entities in other industries, benefit from Washington's unilateral sanctions.

China has always strictly implemented UN Security Council resolutions related to North Korea, but this does not mean unconditional support for unilateral US sanctions, reports of which sent Asian stocks lower. Efforts are needed to maintain capital market stability and strengthen coordination with related countries.

The author is a reporter with the Global Times.


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