A Global South Diversification Strategy

I believe Singapore should reject binary alignment with either Washington or Beijing, not as a temporary hedge, but as a permanent structural doctrine, and I believe this doctrine should be backed by concrete diversification across critical minerals, reserve composition, institutional positioning, and formal trade targets across the Global South.

Part One: Trading American Dependence for Chinese Dependence Solves Nothing

Outright alignment with China trades dependence on one great power’s currency, capital markets, and political stability for dependence on another’s, with the same category of risk simply relocated.  China’s economy carries documented vulnerabilities: a property sector still working through Evergrande’s January 2024 Hong Kong liquidation and the broader sector’s US$300 billion in defaulted debt, a domestic consumption base structurally weaker than its export capacity, and a demonstrated capacity for abrupt, centrally imposed policy reversal, visible in the sudden December 2022 abandonment of zero-Covid following nationwide protests, and in the 20 per cent offshore trust tax Beijing imposed with a 90-day compliance window in July 2026.  I believe jumping from American overreliance to Chinese overreliance is not diversification.  It is the identical structural mistake wearing a different flag.

Part Two: The Non-Alignment Doctrine Already Exists

I did not invent this position.  Foreign Minister Vivian Balakrishnan has stated Singapore “does not take sides” but rather “upholds principles,” and has described our approach as “omni-directional engagement ... with all the multiple poles of power that are emerging.”  Speaking to Parliament in February 2026, he went further, stating Singapore would not act as “a proxy for any major power,” and must be prepared to “courteously stand up and say no,” a principle he applied to China as much as the United States.  Then Prime Minister Lee Hsien Loong stated on 1^st April 2022 that Singapore is not a US ally, will not conduct military operations on its behalf, and will not seek direct US military support, a position Prime Minister Wong Shyun Tsai reiterated in 2024.  When Donald John Trump imposed a 10 per cent baseline tariff on Singapore in April 2025, despite Singapore running a trade deficit with the United States, Wong stated Singapore was “very disappointed” and that “these are not actions one does to a friend.”

Foreign Policy magazine identified the risk: “The danger for the United States is not that Singapore suddenly pivots toward China.  It is that Singapore gradually diversifies its diplomatic, economic, and strategic relationships in ways that reduce US” leverage.  I believe this diversification is already under way, and I believe we should stop framing it, in official communication, as a reactive hedge adopted each time external pressure forces a response, and start stating it as the permanent structural doctrine it already is in substance.

Part Three: Singapore Should Not Pursue Reserve Currency Status

The Singapore dollar held its value through the 2019 Gulf tensions with only a 0.4 per cent decline, against 1.5 to 2.5 per cent losses among regional peers, and repeated this through 2026’s Iran-linked turbulence.  This makes Singapore Government Securities look, on paper, like a candidate for central banks diversifying away from concentrated Treasury holdings, especially given the dollar’s reserve share has fallen from over 70 per cent in 2000 to under 59 per cent by 2024, and central banks bought a record 288.9 tonnes of gold in a single quarter of 2026.

I do not believe Singapore should pursue this, and MAS’s decades-long policy already reflects why.  MAS has maintained a long-standing policy of actively discouraging internationalisation of the Singapore dollar.  A 1996 IMF working paper explained the reasoning: “The MAS frowns on internationalising the local currency because it believes that a large pool of Singapore dollars in the hands of non-residents can be a source of exchange rate instability.”  MAS manages inflation through the exchange rate, not the interest rate, the “only macroeconomic instrument” it uses to stabilise domestic prices.  A pool of foreign reserve demand for Singapore dollars would introduce persistent currency appreciation pressure unrelated to our domestic needs, forcing an impossible choice between an overvalued currency and continuous, self-defeating intervention.

Economist Robert Triffin’s 1960 dilemma applies here even in Singapore: supplying enough currency to satisfy global reserve demand typically requires running persistent external deficits, undermining the currency’s stability.  Singapore has built its AAA rating on the opposite discipline, a net asset position sustained by current account surpluses.  I believe this recommendation should be rejected, and MAS’s existing non-internationalisation stance affirmed as correct.

Part Four: Institutional Continuity is a Measurable Comparative Advantage

I believe Singapore’s institutional continuity is not a marketing claim, but a measurable, decades-long track record we have not yet stated with sufficient force.  The Economic Development Board was established in 1961.  The Housing and Development Board followed in 1960, now housing over 80 per cent of citizens under one continuous mandate.  GIC was established in 1981 and has run a single investment mandate for over four decades.  The World Bank’s Worldwide Governance Indicators score Singapore’s Political Stability index at an average of 1.27 points across 1996 to 2023, against a global average of negative 0.06, ranging narrowly between 0.88 and 1.6 across nearly three decades.  A range this narrow, over this long, shows not merely high governance quality but near-zero volatility in it.

This is already converting into measurable capital.  Singapore’s single family office count grew from 400 in 2020 to over 2,000 by 2026, assets under management approaching S$7 trillion, driven by capital fleeing China’s offshore trust tax, the UK’s non-domicile exodus, and Dubai’s conflict exposure.  Each source market shares the same driver: a sudden, discontinuous policy shift our institutional architecture does not produce.  I believe we should state policy continuity itself as the headline argument in economic diplomacy and EDB investment promotion, rather than leaving it implicit inside a list of Singapore’s more frequently cited attributes.

Part Five: The Concrete Critical Minerals Opportunity

Thirty years of reversed American policy on tax, infrastructure, and industrial strategy stand in contrast to China’s decade-long planning cycles, visible in its consolidation of rare earth markets.  China controls 90 per cent of global rare earth processing capacity, over 60 per cent of lithium refining, and imposed export licensing on seven heavy rare earth elements in 2025, pushing European prices to six times Chinese domestic levels.

I see a concrete opportunity here, built on treaty architecture we already hold.  Singapore and Australia signed the Singapore-Australia Green Economy Agreement and Digital Economy Agreement, both in force.  Both countries are part of RCEP and CPTPP.  Australia holds substantial lithium reserves but limited processing capacity.  Indonesia controls the world’s largest nickel reserves, though 75 per cent of its refining capacity is already controlled by Chinese firms following over US$30 billion in Belt and Road-linked investment.  Australia’s counterbalancing effort, Nickel Industries’ US$1.7 billion investment at Morowali Industrial Park, remains a fraction of Chinese capital in the same sector.  I believe a Singapore-based trading and financing intermediary, built under our existing treaty framework, could aggregate Australian lithium output, blend it with non-Chinese-controlled Indonesian nickel supply, and route it toward AI infrastructure buyers across CPTPP markets, without a single new treaty.  The window is real because Western reshoring remains structurally years away: the EU’s Critical Raw Materials Act targets only 10 per cent domestic extraction by 2030, and Washington’s US$12 billion Project Vault exists to stockpile minerals, not build processing capacity.

Part Six: A Formal, Measurable Global South Target

Singapore already applies precise, tracked metrics to bilateral trade.  Trade in goods with Latin America more than doubled over five years to over S$35 billion in 2025.  The Pacific Alliance-Singapore Free Trade Agreement entered into force in May 2025.  Our bilateral trade in goods with the UAE reached S$24 billion in 2024, with services trade growing 22 per cent year-on-year, and Singapore’s investment into the UAE grew 13 per cent to S$4.9 billion in 2023.  We have maintained a Gulf Cooperation Council free trade agreement since 2013.

The gap is with Africa.  Africa’s trade with Southeast Asia amounted to just 2.2 per cent of the region’s total world trade in 2021.  African investment into ASEAN totalled just US$188 million that year, 0.1 per cent of ASEAN’s total inward investment.  Then Minister Gan Kim Yong himself acknowledged this at the Africa Singapore Business Forum, stating investment flows “pale in comparison to the opportunities available.”  I believe MTI and MAS should answer that question by formalising a single, published Global South diversification target, tracked with the same specificity already applied to individual bilateral FTA performance, and reported on a fixed schedule Parliament can hold the government to.

My Conclusion

I have made the case that Singapore should reject binary alignment permanently and explicitly, not pursue reserve currency status despite its surface appeal, state our institutional continuity as the headline diplomatic asset it already is, build concrete critical minerals infrastructure on treaties we already hold, and set a formal, measurable Global South diversification target where the gap, particularly with Africa, is already documented and already raised in our Parliament.  None of this requires choosing a side in the cycle described in my first paper.  I believe it requires building the infrastructure that lets Singapore keep functioning regardless of how that cycle resolves.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code