President Xi Jinping hosted the leaders of North Korea and Russia in Beijing for the first time, marking a historic show of united defiance against the US-led world order.
Vladimir Putin and Kim Jong Un flanked China’s commander-in-chief as he approached Beijing’s Tiananmen Gate at a vast military parade on Sept 3, in his first-ever appearance with both men. Not since the Cold War have leaders from all three nations stepped out together, with the last time being a 1959 march in Beijing, when Mao Zedong welcomed Kim Il Sung and Nikita Khrushchev.
Images of Putin and Kim — whose countries are subject to US sanctions — centre stage were beamed around the world as Beijing rolled out missiles capable of reaching American shores. Xi’s tight embrace of both nations will likely worry many Western nations, whose leaders were largely absent from the parade, and have voiced concern over China’s military ambitions toward Taiwan.
The trio’s joint appearance was “symbolically meaningful,” said Joseph Torigian, assistant professor at the American University, who warned the optics could also cause Beijing reputational damage in the West.
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“Certainly, if you’re sitting in Europe or Washington, and you’re wondering whether the world is falling into different blocs based on authoritarian regimes, then it’s something they could pay attention to,” he added.
Giving a rare glimpse into the small talk of strongmen, Xi was heard discussing with his top two guests how biotechnology could this century, extend life expectancy to 150 years old, something perhaps more relevant to septuagenarians Xi and Putin than 41-year-old Kim. Age and health have been a concern for all three leaders; however, none have appointed clear successors.
Beijing’s big pageant marking the end of World War II came just days after Xi hosted a major security summit, where he seized on another photo opportunity. Footage of Xi holding Indian leader Narendra Modi’s palm as they huddled in a close circle with Putin sent a clear message to Trump that neither man plans to cave under US tariff pressure to curb Russian energy purchases.
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The bonhomie between Xi and his guests this week struck a contrast with Trump’s increasingly tense ties with traditional US allies, including European nations targeted by his sweeping trade war. Several Oval Office showdowns, including one with Ukraine’s Volodymyr Zelensky, have highlighted the volatile nature of the US leader’s diplomacy on the world stage.
Before a crowd including a constellation of Global South leaders from countries such as Vietnam, Malaysia, Pakistan and Iran — all potential buyers of China’s military goods — Beijing showcased its latest anti-ship missiles, combat drones and nuclear-capable ballistic missiles, projecting the power of its armed forces.
The spectacle on Chang’an Avenue gave investors a reason to take profit from a recent stock rally in companies that build the hardware. A Goldman Sachs gauge tracking Chinese defence stocks fell 7.1%, extending losses for the third session. The CSI National Defense Index has jumped 22% this year, outpacing the broader CSI 300’s 13% advance, adding extra motivation for investors to cash in on the gains.
China’s parade was always about more than the hardware. By invoking memories of wartime trauma, Xi is seeking to rally domestic patriotism amid a faltering economy, while shoring up Beijing’s claim over self-ruled Taiwan and bolstering China’s status as a pillar of the post-war world order.
“The Chinese nation is a great nation that does not fear power and intimidation and is determined to stand self-reliant and strong,” Xi said in a speech after soldiers fired an 80-gun salute and raised flags. — Bloomberg
Singapore’s snowballing cash levels are boosting local bonds
The recent build-up of cash in Singapore’s money market is strengthening demand for the nation’s bonds, driving returns to near the highest in the region.
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The cost of borrowing in the interbank market fell to the lowest since June 2022 this week, after tumbling more than 70 basis points in August. Inflows driven by expectations of further currency strength, dwindling net bill sales and slower loan disbursals have enhanced the city’s cash levels, a mix that’s likely to keep overnight rates subdued.
Adding to the city’s cash levels are foreign investments into Singapore’s bonds, which are underpinned by the city-state’s top credit rating. The securities are increasingly viewed as safe-haven alternatives to US assets amid concerns over President Donald Trump’s fiscal policies.
“Singapore dollar liquidity conditions could remain flush in the near term amid demand for AAA-rated currency markets,” and restrained property loan growth, said Philip McNicholas, Asia sovereign strategist at Robeco in Singapore.
He expects the Singapore Overnight Rate Average to fall further in the short term.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than interest rates, eased policy in January and in April in the face of US tariffs. It kept the policy unchanged in July, and said it will maintain the prevailing rate of appreciation of the Singapore Dollar Nominal Effective Exchange Rate policy band.
“The MAS’s appreciation stance for Singapore’s FX-based policy, which has the tendency to attract capital inflows, adds to this,” McNicholas said, referring to the city’s ample cash levels.
However, an unexpected policy easing by the MAS in October will pose a risk to excess liquidity, he said. “This could take the form of a shift to a neutral stance, or even a re-centring lower of the target band that adversely impacts currency return expectations.”
The Singapore dollar is expected to strengthen to 1.27 per greenback by mid-2026, according to a median of strategists surveyed by Bloomberg. It was around 1.2883 at 5:30 pm in Singapore on Sept 3.
Measures from authorities to cool the property market have slowed lending, pushing the city-state’s loan-to-deposit ratio to 65.9% as of July, according to MAS data. That’s the lowest in data going back to 2021.
The MAS issued $20.9 billion of bills as of the end of August, versus the average net supply of $51 billion in the previous four years. That’s left traders with excess cash, much of which is flowing into the bond market.
An auction of a 2030 bond last week drew a bid-to-cover ratio of 2.66 times, the highest in a year for the tenor. A Bloomberg total return index of Singapore bonds has handed investors a gain of 16.6% this year, the most in emerging Asia after Thailand.
Frances Cheung, head of FX and rates strategy at OCBC, sees Singapore’s 10-year bond yields staying around the current level of 1.85% until year-end. “Singapore government bonds remain an appealing asset for both domestic and foreign investors,” she said. — Bloomberg
