Ok, I don’t know if you keep up with the “Op-Eds” that emanate from Beijing’s long list of Party mouthpiece “news” outlets, but if you don’t, you should. Because when you hit that Google translate button, what comes out is usually nothing short of hilarious.
China loves to troll America on everything from foreign policy to economics and one of their favorite ways to do it is via what are ostensibly “opinion” pieces that show up in Chinese media.
Of course they aren’t really Op-Eds – they’re warnings and/or admonitions emanating directly from Beijing. And they usually coincide with something the US has done or said that either i) offends the Party, or ii) the Party thinks might make everyday Chinese citizens nervous.
Well on Thursday night, we get China’s official, unofficial response to Wednesday’s Fed hike courtesy “Economic Information Daily.” Between laughs, do note that there’s an explanation as to why China didn’t hike last night (for more on that see here and here).
The piece excerpted below is attributed to one “Dong Ximiao,” who Bloomberg sarcastically notes “isn’t identified.”
Via Economic Information Daily (Google translated)
On the morning of June 15, the Federal Reserve announced a 25 basis point increase from the federal funds rate target range to 1.00% to 1.25%. The Federal Reserve to raise interest rates in full compliance with expectations, limited impact on China’s financial markets, without worry or need to passively follow. However, the United States will take the “scale” plan should be kept close attention.
The rate hike is the Fed’s second rate hike during the year, but also since December 2015 to start a new rate hike since the fourth rate hike. As the market to raise interest rates on the node and the rate hike has long been expected, so the rate hike did not bring a significant impact on the market. After the announcement of the Federal Reserve policy announcement, the dollar index rose sharply after a slight dive, the US stock market placid, to maintain a small state. This year, China’s implementation of sound and neutral monetary policy, through the monetary policy operation tool moderately raised the market interest rate, the early digestion of the US interest rate may bring the impact. Therefore, China’s financial market response calm, the RMB exchange rate remained stable, the card, Shenzhen Composite Index both slightly higher.
At present, the global economic development environment gradually improved, although China’s economy is still bottom, but the signs of stabilization, economic growth quality is also constantly optimized. China’s recent financial market despite the fluctuations, but more affected by domestic factors. The Federal Reserve to raise interest rates, the central bank to maintain the open market interest rates unchanged, June 15 150 billion three kinds of deadline repurchase operations successful bid rate and the last flat. This also shows that China has not raised interest rates in the near future.
At present, China’s money market capital interest rates have risen, causing the market a high degree of concern. In the “stable neutral” monetary policy, the market liquidity is expected to remain in the “not tight” state. Recent tightening of funding is more related to the quarterly MPA assessment and market overreaction to the “strong regulatory” policy. To ease the market liquidity tensions, the central bank has recently adopted a variety of monetary policy tools into liquidity, greatly easing the market for seasonal liquidity concerns, but also regulators this year, “strict supervision” caused by the formation of a certain market tension The degree of hedging, effectively stabilize the market expectations. It is expected that with the end of the end of the assessment and the gradual adjustment of the structure of the assets and liabilities of the banking industry, the late state of funds will ease the situation, interest rates may also come down. In addition, we must see that money market funds are not the main source of bank loan funds, the main source of bank loans is still deposits, the money market interest rates higher than the real economy has not had much impact.
Although the global market for the rate hike is not surprising, but can not be ignored is that the United States in 2015 and 2016 only to raise interest rates once, and 2017 in six months to raise interest rates twice, the United States to open interest rate cycle action is clear And the pace is getting faster and faster. From the historical data, the Fed almost every rate hike cycle have a significant impact on the global market, the impact of emerging markets more obvious. In general, the US rate hike will promote the global dollar funds from overseas to return home. In addition, it is noteworthy that the Fed meeting this year will begin to reduce the balance sheet. Specifically, the upper limit of the “start” is $ 10 billion a month, of which $ 6 billion is for Treasury bonds and $ 4 billion for mortgage-backed securities (MBS). Then will gradually increase, the final table cap is 30 billion US dollars of government bonds, MBS 20 billion US dollars, a total of 50 billion US dollars per month. Compared to the expected rate hike, the US “schedules” plan on the impact of the global market may be greater, or exacerbate the liquidity of tension, which can not be taken lightly.