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North Korea and China

September 9, 2017

North Korea’s nuclear efforts are dominating headlines, with the U.S., China, South Korea, Russia and Japan all concerned about the escalation in nuclear testing.

China is especially uneasy given October 18th’s special communist party meeting in Beijing (its 880 mile long border with North Korea is undoubtedly a major concern as well). These meetings are held every five years and are when the party appoints the leadership team for the next five years. Unrest from North Korea could be a huge distraction as China tries to make a smooth leadership transition.

On the positive side for China, economic growth has exceeded expectations this year, with its currency strengthening versus the dollar. Top Chinese internet companies like Tencent and Alibaba (often called the Facebook and Amazon of China) have risen strongly, outpacing their U.S. rivals (see chart).

China will also try to defuse North Korean tensions for external reasons, as China expands its role in the world as a major political force and will join efforts with other countries to restore calm to the region.

 

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