Sanctions imposed on Chinese banks could have ripple effects on the so-called ‘China proxy’ trade, which involves investing in currencies and assets that are expected to benefit from China’s economic growth.
One such currency is the Australian dollar (AUD), which has been seen as a proxy for the Chinese yuan. If Chinese banks are sanctioned, it could reduce demand for the yuan and, by extension, the AUD.
The ‘China proxy’ trade has been a popular way for investors to gain exposure to China’s growing economy without investing directly in Chinese assets. However, if sanctions are imposed on Chinese banks, it could make this trade less attractive.
Investors should be aware of the potential risks associated with the ‘China proxy’ trade and consider diversifying their portfolios accordingly.
