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Geopolitical risks: Should Asia worry about a Ukraine crisis?

Manu Bhaskaran
Manu Bhaskaran1/27/2022 5:15 PM GMT+08  • 10 min read
Geopolitical risks: Should Asia worry about a Ukraine crisis?
There's a rising chance of military conflict in Ukraine. But fears that it would spread to Asia are greatly exaggerated.
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Financial markets have become highly volatile over growing geopolitical concerns. Worries over the US Federal Reserve Bank’s monetary policy may have played a part in recent market corrections, but the severe drubbing that European markets took compared to American ones suggests that the increased prospects of a war in Ukraine are a more important reason for the market gyrations. Asian markets also took a beating — investors became more risk-averse and pulled capital out of emerging markets and into safe havens. Investors in Asia also worried that mis-steps by the US and its allies in Ukraine might embolden America’s rivals in Asia to become more aggressive.

Our view is that there is indeed a rising chance of military conflict in Ukraine. But fears that military confrontation would spread to Asia are greatly exaggerated. Tensions between China and Taiwan are certainly intensifying, but arguments that China would be emboldened by American mis-steps in Ukraine into attacking Taiwan do not stand up on closer examination. Rather, China is likely to pursue a patient strategy of relentlessly increasing pressures on Taiwan, taking care to avoid any chance of a direct clash with the US for now.

What’s likely to happen in Ukraine?

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