The COVID-19 pandemic outbreak has unduly worsened the existing geopolitical frictions among superpowers, shattering the existing global order and nearly sending the world into deeper chaos. With these changes, some countries and regions are feeling the impact of this global reshuffling and have regressed further. Yet, there are also countries that are benefiting, and if these countries can seize the opportunity, they will usher new positive developments. Among these countries in this ever-changing world, Singapore emerges as a blessed nation.
As one of the international financial hubs in Asia, Singapore’s financial status has actually been strengthened amid the COVID-19 pandemic. According to the South China Morning Post, the spread of the novel coronavirus has led to shrinking transactions in major global foreign exchange markets. Data released by foreign exchange industry organizations in various countries and regions indicate that in April this year, the average daily transaction volume of the seven conventional foreign exchanged and currency derivative markets (i.e. Australia, Singapore, Hong Kong, Tokyo, Japan, London, the United Kingdom, the United States, and Canada) fell 11.4% in October last year to USD 4.93 trillion. Hong Kong and China fell 7.8% to USD 524 billion. Australia fell by 7.2% and Canada fell by 9.1%. London continues to maintain its position as the world’s largest foreign exchange market, but its trading volume has fallen the most, from a historical high in October by 16.3% to USD 2.4 trillion. Meanwhile, New York fell 14% to USD 765 billion.
In Asia, the trading volume of Hong Kong’s foreign exchange market has fallen sharply, but the foreign exchange trading volume of Singapore and Tokyo, which have also been affected by the pandemic, has seen some increase. In April this year, Singapore’s trading volume increased by 0.3% to USD 549.5 billion per day, surpassing Hong Kong, and becoming the largest foreign exchange market in the Asia-Pacific region. Transactions in Tokyo rose by 6.5% and ranked behind Hong Kong.
According to a triennial research data released by the Bank for International Settlements (BIS) in December last year based on different calculation methods, the average daily trading volume of the Singapore foreign exchange market in 2019 increased by 24% compared with 2016, to USD 639.9 billion. During the same period, Hong Kong’s transaction volume increased by 45%, reaching USD 632 billion. The U.S.-China relations have become increasingly tense since 2020 and this has undoubtedly affected Hong Kong’s status as an international financial center. In July this year, Bloomberg quoted a report saying that the U.S. government is considering a proposal to crack down on the Hong Kong dollar peg to the U.S. dollar. The U.S. may undermine the current Hong Kong dollar pegged exchange rate system by restricting the ability of Hong Kong banks to buy U.S. dollars.
In addition to changes in the size of the financial market, some multinational companies have also relocated to Singapore. For example, Deutsche Bank’s Asia-Pacific regional headquarters was originally located in Hong Kong, but due to the downturn in Hong Kong’s economic environment, the bank decided to move to Singapore in August this year. Zoom Video Communications announced the establishment of a data center in Singapore, making it the first time the company expanded its business to Southeast Asia. Since January this year, Zoom’s free users in Singapore have surged 65 times, while its paid users have also surged twice. In the past, almost all major international banks, including Goldman Sachs, Citigroup, and JPMorgan Chase, stationed their top regional executives in Hong Kong, but now Singapore seems to be the preferred choice against Hong Kong.
Why is Singapore favored by multinational companies and financial markets? There are many answers to this, for instance, Singapore has its unique geographical advantage as is located in the middle of Europe and Asia, connecting the Pacific and the Indian Ocean regions. Others pointed out that Singapore’s government is highly efficient, clean and pragmatic; the country also provides high service standards and a good business operating environment. In addition, Singapore attaches great importance to talents and spends a lot of money every year to recruit high-level talents from all over the world. Singapore had always had these advantages, however. But why is Singapore now showing its advantages in its “competition” with Hong Kong?
ANBOUND researchers are of the opinion that the geopolitical changes around the globe are important factors that cannot be ignored. Since 2019, Hong Kong has experienced major social unrest that has damaged its business environment. The United States too has imposed various sanctions, cancelling its trade preferences and special customs territory status. Meanwhile, the Mainland’s central government has now implemented National Security Act to reshape the overall situation. In the geopolitical game among major powers, Hong Kong has become an important focus. As various analysts have noted, Hong Kong is the central ground for the geopolitical game between the West and China.
It is in this context that Singapore’s various advantages are now getting the highlights. Compared with Hong Kong, Singapore’s biggest advantage is that it is far away from the frontier “battlefield” of the geopolitical game between major powers. It has maintained its own security and openness in such turbulent times and has greater stability as expected by the market. Capital is inherently aiming for stability and tends to avoid risks. If the uncertainty and potential risks of a market are too great, capital will definitely stay away from this market and seek a safer one instead. Singapore’s values are not consistent with Western countries, and there are even conflicts in some areas. However, Singapore has long focused on maintaining a balance between the East and the West, thus establishing its own unique international status, and this is the foundation that Lee Kuan Yew laid for Singapore. If the geopolitical game in the world remains intense, Singapore’s comparative advantage will continue to be prominent for a long time to come, and it will be more likely to be ahead of Hong Kong in the future.
Final analysis conclusion:
Under the dual impact of the international geopolitical game and the COVID-19 pandemic, Singapore has maintained a stable, safe, efficient, and open development environment with its unique position and strategy, which has become highly attractive to the market and help it to successfully gain more development opportunities. This also allows Singapore to obtain higher advantages when competing with Hong Kong.