South China Sea: Why Global Markets Ignore China's Repeated Warnings

By Panos Mourdoukoutas 

China is getting noisier and noisier in the South China Sea, sending warnings to every nation that challenges its ambitious agenda—to write the navigation rules for the world’ busiest sea trade route.
Like a warning Beijing sent to Taiwan and the US last December in the form of a naval force demonstration, as a group of Chinese warships that included the country’s only aircraft carrier made its way to the South China Sea after passing south of Taiwan in a “routine” exercise.
Then there are warnings to Japan in the form of “red lines,” to South Korea in the form of import bans and boycotts of Korean products, and to India by not supporting New Delhi’s bid to join the Nuclear Supplier Group (NSG).
The trouble for China is that nobody seems to take its warnings seriously. 

At least global financial markets aren’t, for the time being.
In fact, global markets have been in a rally mode in recent months. 

Even as Beijing’s South China Sea protests intensified in recent months. 

With one exception: the Philippines’ financial markets that have been confused by the President Duterte’s flip-flops.
Why do global markets ignore China’s repeated warnings that have the potential of an open confrontation between Beijing and Washington? 

Because such a confrontation is an unlikely scenario far into the future.
Meanwhile, China can’t afford to openly confront the US, as the consequences will be too devastating for its export dependent economy, US Treasury holdings, and authoritarian regime.
Apparently, global markets have already sensed this cruel reality for China. 

That’s why they treat Beijing’s protests as loud noise rather than something more serious, focusing instead on Washington’s and the Fed’s policies.