China to raise interest rates still very cautious Fed

  Source :() Beijing at 2:00 on March 22, the US Federal Open Market Committee (FOMC) announced a monetary policy statement, the decision will be raised to% to% target range on the benchmark interest rate。
This was the first rate hike this year, Powell also served as chairman of the Fed's first rate hike since。   Despite caused widespread concern, but the Fed rate hike did not exceed market expectations, which is consistent with the gradual development of the current Federal Reserve, sought to prudent monetary policy。   According to the National Economic Situation report Federal Reserve recently released this year, the beginning of January to the end of February, the US economy continued to moderate and moderate expansion, and the Fed also confirmed in the semi-annual monetary policy report to Congress, the steady US economic growth, will support the Fed continues to tighten monetary policy。   In the new Fed Chairman Powell's view, the global economic growth momentum strong, positive role of fiscal policy to stimulate the economy is also growing; and the Fed's current economic growth, the job market and inflation outlook has not changed judgment, and said he would like his predecessor as with focus on marketing communications, we are committed to maintaining the established monetary policy goals or intentions, suggesting that interest rates will be positive, but not too fast pace, raising interest rates too high to maintain uniform rhythm。   The rate hike since the current round of rate hike cycle started in December 2015, the Fed's sixth rate hike。 It the world economy, especially on emerging market economies is obvious。
China although it has become second only to the United States, the world's second largest economy, but still belongs to the category of emerging market economies, is still likely to be part of the negative impact of this rate hike to bring: First of all, the continued appreciation trend may be affected。 According to statistics, as of the end of February, China's foreign exchange reserves amounted to billion, compared with 1 billion dollars at the end of a decrease of $ million, a decline%。 January 2017 China's foreign exchange reserves fell below $ 3 trillion, followed by the 12th consecutive month rise, the first decline。
But will not cause further decline in foreign exchange reserves, China will reduce the ability to deal with financial risks and crisis, the current market remains to be tested。   Second, the need to prevent the Federal Reserve to raise interest rates may bring a chain reaction, mainly in three aspects: First, the Chinese market liquidity itself basically more reasonable, if the central bank reserves to cope with capital outflows pressure to improve the implementation of deposit, interest rates, etc. hedges, it is possible to break the balance of market liquidity, increasing capital supply pressure, inhibition of scale, so that the financial sector's ability to support the real economy decline。
In particular, it is possible to push up the overall domestic interest rates, raising the cost of financing economic entities, delaying the process of solving difficult financing the real economy, financing expensive。 So will the real economy is not conducive to life back in business。
  Second, the current economic data released by the National Bureau of Statistics show that the country showed signs of stabilization pick up, if the central bank needs to raise interest rates in response to the Fed's tightening of monetary policy introduced corresponding risk may not only alter the established prudent neutral monetary policy, the Chinese economy will the steady rise of overall adverse。
  Third, the national market may also be due to the potential risk of capital outflows tightened, so that more small and medium housing prices facing the impact of the Federal Reserve to raise interest rates to bring。
Once the real estate market into a weak, will likely trigger a chain reaction set off to bring local government debt, the risk of a series of crises in manufacturing non-performing loans, shadow banking, etc.。   Once again, the Federal Reserve raising interest rates may also have negative impact on China。
  Though the Federal Reserve to raise interest rates for the formation of a direct impact, but on Wall Street fear the formation pressure, increase the probability of short-term decline。 For US stocks, A shares do not always have the traditional with the fall with the rise, once the A-share stocks fell easily follow suit。   Meanwhile, the US Federal Reserve to raise interest rates favorable economy, the US economy form a magnet effect on the world's capital, in particular, the expected depreciation of the yuan, once formed, will lead to the risk of hot money outflow, faced with shrinking domestic liquidity is not conducive to A shares strong, and investment confidence and sentiment will also have a negative impact。
  Based on this, for the Federal Reserve to raise interest rates, the Chinese government should be prepared to deal with measures: First, to be an ample supply of ammunition on monetary policy, currency increase preventive tool in the toolbox, maintain appropriate liquidity and market adjustment flexibility。   Second, we must accelerate efforts to reform the financial, institutional and foreign exchange market, including the market, free movement of capital, improve the ability to cope with the impact of exchange rate。
  Third, we must increase efforts to adjust industrial structure, to further promote the supply side structural reforms to accelerate the pace of reform of state-owned enterprises and corporate zombie clearing speed, to optimize the efficient allocation of social resources。
  Fourth, we must take measures to guide the healthy development, channel funds to the real economy, the real economy to promote physical fitness, reinforce the foundation of the real economy growth, making it a huge sponge to absorb the impact of the Fed rate hike pad。
  (The author is a Chinese non-performing assets Industry Alliance Financial & Legal Researcher Institute)。