At a time when the world is disassociating itself from China and the communist nation is itself on a self-destructive spree, the rich, influential, and famous nation of Singapore seems to be helping Chinese out of compulsion. Singapore has entangled itself in a vicious and toxic relationship with China. The communist nation is seeing its economy unwinding right before it eyes, and it can do nothing about it. However, Singapore has some major interests, investments and assets in China – all of which will go down the drain if it sits idle and does nothing. So, at a time when China seems to be going through its Lehman Brothers crisis, Singapore is trying to save it.
Singapore’s largest banks are raising their stakes in the Chinese market. According to Nikkei Asia, DBS Group Holdings, Oversea-Chinese Banking Corp., and United Overseas Bank – some of the biggest lenders in the 10-member Association of Southeast Asian Nations this week reported figures that showed surging profit and increased lending to clients in China.
The effort by Singapore to appear bullish on the question of China’s economy and couple the same with its largest banks raising their stakes in China might help the island city get in the good books of Beijing, but the same promises to backfire very soon. The Chinese economy is on the edge, and the communist nation’s $50 trillion financial system is the most fragile it has ever been. By raising stakes in China at a time when one major company after the other is falling in the mainland is indicative of how Singapore needs to decouple itself from China immediately.
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The Evergrande crisis of China led to a series of companies in China defaulting on their huge loans. Modern Land China has become the latest developer from Asia’s largest economy to miss a dollar bond payment, underscoring the stress spreading across the sector in China. Earlier, Fantasia Holdings, Sinic Holdings, and China Properties had all defaulted on offshore notes. Modern Land China missed a dollar bond which is listed on the Singapore Stock Exchange, essentially meaning that the Singapore stock exchange will also suffer as collateral for all major Chinese companies’ bonds and shares listed with it and running into defaults.
In 2020, Singapore’s portfolio investment assets in China amounted to 262.76 billion Singapore dollars. Since 2013, China has been Singapore’s largest trading partner, and Singapore has been China’s largest foreign investor. In 2018, the China-Singapore Free Trade Agreement (CSFTA) was upgraded, and according to Singapore, CSFTA now comprises of a meaningful and substantive package in terms of market access for Singapore’s export of goods and services into China, and provides greater transparency and predictability for business activities between the companies from Singapore and China.
Singapore and China have established three Government-to-Government projects, which include the China-Singapore Suzhou Industrial Park, the Sino-Singapore Tianjin Eco-City, and the China-Singapore (Chongqing) Demonstrative Initiative on Strategic Connectivity. As of 2019, Singapore accounted for 5.5% of all foreign direct investments in China – which is the highest among all foreign nations investing in China.
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Meanwhile, in 2019, Singapore became China’s largest foreign direct investment destination country, and the number of Chinese companies operating in Singapore is also increasing. In 2020, during the Trump administration’s unforgiving economic assault on China, major Chinese companies like Tencent and Alibaba began investing billions of dollars in Singapore.
The bilateral trade between China and Singapore developed rapidly in recent years, and Singapore has maintained the first position among ASEAN countries in their trade with China. Companies such as Capitaland and Breadtalk have made substantial inroads into China’s domestic economy. Others such as Temasek Holdings, Singapore Airlines have each invested in China Eastern Airlines.
Singapore forced to protect its interests in China:
Having entangled itself so madly with China, Singapore is now desperately trying to save its assets in the communist nation. Its many investments in China can evaporate into thin air at any given moment, given the current state of the Chinese economy. Therefore, by getting its largest banks to raise their stakes in China, Singapore is doing its part in trying to save the Chinese economy from going completely bust.
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However, Singapore will be well advised to withdraw from China as soon as possible, in order to mitigate the impact it would face when the communist nation switches off. While Singapore is bullish on the prospects of a recovering China, this is false optimism at best, and suicidal enthusiasm at worst. For the city state to remain prospering, it needs to look away from China and seriously tackle its overdependence on it. Singapore cannot save China, and it should stop trying to do so at its own expense.
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