TheeconomicconsequencesforChinaofanewKoreanWar(7)

The yuan, abruptly untethered from the US dollar, would collapse in value worldwide – ending any dreams of it being a global reserve currency. Chinese people would rush to “hard” – ideally movable – assets to protect their wealth. The second-largest economy in the world could abruptly disaggregate as core “backstop” institutions like the banking system wither and investors lose confidence in the CPC.
Plunging asset values
Implausible scenario? Given the advocacy by Xi and the CPC leadership of nationalism and imperial aspirations, the Beijing regime will be under intense pressure to prove its mettle as a superpower to the Chinese people – pushing it into taking action to save North Korea, however symbolic and unwise it may be strategically for the survival of the CPC.
In any event, uncertainties generated by how Beijing and Chinese elements would respond to an allied military attack in Korea would cause asset values to plunge. That is before consideration of the inherent vulnerabilities of the highly leveraged, wobbly and fragile Chinese economy and government.