The US Federal Reserve Board announced on September 18 that it would lower the target range for the federal funds rate by 50 basis points, to a level between 4.75% and 5.00%. This is the first time in four years that the Federal Reserve has cut interest rates.
The interest rate cut in the United States has re-provided a relatively loose liquidity environment for the world, and Europe and China will take a breath on the macro level.I personally believe that the Fed's interest rate cut will have the following four impacts on China's foreign trade economy.
The impact on the RMB
First of all, it will increase the pressure of RMB appreciation, the US interest rate cut may lead to the depreciation of the US dollar, in the exchange rate market, the RMB exchange rate reduction, the RMB appreciation, which is conducive to China's export-oriented economy imports, but not conducive to exports. The dollar prices of China's exports will rise, making them less competitive in international markets. After the appreciation of the RMB, it may take US $110 to buy Chinese goods that could be bought for US $100. This will increase the cost of Chinese goods for foreign customers, thus reducing the amount of purchases and adversely affecting the export scale and profits of Chinese export enterprises.
The impact on foreign investment in China
If the interest rate of the United States loses its comparative advantage, a large amount of money will come out of the bank, and when people see that they are not making money, they will take the money and run away from the United States. When a large amount of money is returned to the country, it will bring a large amount of investment, and the factories can expand production and hire again with the money, and the problem of unemployment and wage reduction that everyone worries about will be solved. The Fed's interest rate cut will make the international capital from the original interest rate increase period strong flow to the United States to gradually flow to other countries, which is determined by the profit-driven capital, so it is conducive to China's use of international capital to develop their own economy.
The impact on the capital market
After the US Federal Reserve cut interest rates, the willingness of international strong currencies such as US dollar, euro and British pound to participate in the competition in China's capital market has increased, which is conducive to the external financing of domestic listed companies and the activity of capital market transactions, but it may also have adverse effects on small and micro enterprises and retail investors in China's capital market, because if the supervision is not in place, Small and micro investment institutions and retail investors in the capital market may be cut by large capital households.
Fourth, we will ease the pressure on foreign debt of domestic enterprises
For all kinds of domestic enterprises that borrow dollar capital, the interest cost of debt will be reduced after the Fed cut interest rates, which will reduce some of the pressure to repay. The biggest benefit that China can get from the Fed's rate cut is that it can increase the intensity of monetary easing, anyway, in the environment of US dollar rate cuts, the yuan will appreciate even if it continues to cut interest rates, and without depreci
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