Xi’s Russia trip — Another Game-Changing Event?

Market Insight by Belal Mohammed Khan
Published on 17th March 2023

According to news reports, the President of the People’s Republic of China will visit Russia to meet with Russian President Putin and speak with Ukraine’s President Zelensky.

While market participants and news broadcasters are fixated on the cracks which have appeared in the financial infrastructure and its impact on the industry, economy, and monetary policy, however, we suggest investors also closely monitor events about to take place in Russia and possibly Ukraine.

In his speech at the UN Peacekeeping Summit last year Chinese President stated that « Peace is the common aspiration and lofty goal shared by all of humanity. » The Chinese leader also proposed the Global Security Initiative2 in 2022 and issued the government issued the GSI Concept Paper last month. The focus on peace and collaboration seems to be a key policy priority for President Xi.

In addition, this month, China orchestrated trilateral meetings between the Kingdom of Saudi Arabia, the Islamic Republic of Iran, and the People’s Republic of China. On March 10, the three parties produced the Trilateral Statement by the People’s Republic of China, the Kingdom of Saudi Arabia, and the Islamic Republic of Iran. The joint statement states, « In response to the noble initiative of His Excellency President Xi Jinping, President of the People’s Republic of China, »…the three parties have reached an agreement.

The agreement between the two strained neighbours, Saudi Arabia and Iran, is to resume diplomatic relations that broke in 20163 and re-open their embassies and missions with a period not exceeding two months. In addition, they have affirmed respect for the sovereignty of states and the noninterference in the internal affairs of states. The statement is worth thoroughly reading to understand this event’s magnitude better. The statement also highlights that the two sides have agreed to let China host and sponsor further talks between the Kingdom of Saudi Arabia and the Islamic Republic of Iran.

Regarding the Russia – Ukraine war, if President Xi’s trip to Russia can produce, at the least, a dialogue on peace, it could trigger a sharp market reaction. While we are unsure of the likelihood of a significant positive development from Xi’s meeting next week, we are sure that the probability is greater than zero especially given President Xi’s focus on peace and positive momentum on peace initiatives.

Therefore we believe it is prudent to explore hedge solutions for the possibility of a positive risk event; constructive geopolitical news. Another game-changing event may be near.

Regarding the US and other banking system issues, the financial and banking infrastructure is critical to the economic security of the economy. It thus will likely be protected by any means necessary.

1. Joint Trilateral Statement by the People’s Republic of China, the Kingdom of Saudi Arabia, and the Islamic Republic of Iran

2. The Global Security Initiative Concept Paper

3. Before severing relations in 2016, diplomatic relations were suspended from 1987–1990.

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