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        America's interest rate hike will bring China 5 big trouble

        Date:15.12.17

        As one of the world's largest economies, China in recent years to promote financial liberalization, the United States is bound to increase interest rates will also affect china.
        Yellen's interest rate hike, may bring 5 major troubles to china:
        1 capital outflow
        2 yuan continued to depreciate
        3.A shares frustrated
        4 domestic debt imbalance
        5 external financial environment deterioration
        1 first to see why the Federal Reserve to raise interest rates at this time.
        Financial turmoil swept the United States in 2008, the Fed firmly implement the "quantitative easing" monetary policy, printing money simply can not stop, in order to increase the amount of money supply, stimulate the economy.
        7 years in the past, the U.S. economic recovery, employment improved, prices rise, so the Fed believes that the money back, in order to maintain the balance of the economy.
        But the Fed's move will have an impact on other countries. Originally in September this year, the Fed has intention to increase interest rates, but wound up the global economic downturn, China market crash is worrying, once a large number of capital from other economies out, unpredictable consequences. Therefore, the Fed carefully chose to delay the increase in interest rates.
        British Financial Times analysis believes that the main reason for the Federal Reserve to raise interest rates at the end of the year is the U.S. economy. Since September, the U.S. unemployment rate fell from 5.1% to 5%, while the core inflation rate rose to 2% last month. Wage inflation reached 2.5% per month, the highest level after the crisis. Improvement in the domestic economic situation, the Fed's interest rate hike is the biggest consideration.
        2 Fed rate hike to China's troubles are many aspects of the. The first big trouble: capital outflows.
        The United States after the implementation of the financial turmoil to quantify the policy, a steady stream of dollars to the market, these dollars in order to seek high returns, have been flowing around the world, investing in commodities or sovereign bonds.
        Investors borrow dollars (especially from leverage), and then invest in other countries' markets, which are very common. Since 2000, the scale of the global interest rate trading has doubled to $9 trillion, of which China's capital accounts for about 1/4 to 1/3.
        Therefore, once the Fed rate hike, these in China to carry out the "carry trade" of the massive hot money back, China will form a huge capital outflow pressure.
        People's livelihood securities Guan Qingyou and Li Qilin pointed out that in China's central bank easing and U.S. interest rates are expected to double squeeze, the spread between China and the United States are narrowing. Once the risk spreads upside down, capital outflows will inevitably rise.
        Second 3 big trouble: the devaluation pressure on the RMB exchange rate.
        Fed to raise the federal funds rate, which means that the dollar's interest rate rise, thus inducing capital to abandon the Asian Currency turned to invest in U.S. dollar debt, the result is the devaluation of Asian currencies.
        In recent months, the devaluation of the RMB against the U.S. dollar, in addition to the main pressure from the market for China's economic growth slowed down, there is a strong interest rate hike in the United states.
        2014 average of 6.16 yuan against the U.S. dollar, in 2015 has been reduced to 6.47. Even Bank of the United States is expected next year, the RMB / U.S. dollar will decline to 6.90. Guan Qingyou believes that in the medium and long term, the Fed rate hike will exacerbate the pressure on the RMB exchange rate devaluation.
        If the continued depreciation of the RMB, it will lead to the risk of currency wars in Asia and other regions. Compared to the fed to raise interest rates, the greater the crisis is that if China to abandon the bottom line, which will lead to the global economy into a wave of deflation.
        Third 4 big trouble: lead to capital outflows, the A shares constitute bad.
        From a historical perspective, since the United States in the United States in the United States since 1994, the Shanghai Composite Index in the first rate hike in the 1 months after the fall of.
        Agency Securities pointed out that the SSE Composite index changes that may be caused by the Federal Reserve to raise interest rates capital outflows from China, have negative effects on the stock market of China.
        From the current point of view, the Fed rate hike will lead to capital outflows, the devaluation of the RMB is expected to further strengthen the A shares on the whole is a negative factor.
        Fourth 5 big trouble: to increase the risk of domestic debt imbalance.
        Goldman Sachs pointed out that if the Federal Reserve to raise interest rates, credit leverage emerging markets will appear particularly vulnerable, which is particularly worth the debt ratio of China, South Korea, Turkey, Mexico and other countries.
        China in the emerging market countries in the debt ratio is higher, and the speed of the increase in leverage is also a faster. Goldman Sachs said the risk of debt imbalance in China, the largest. If interest rates led to capital outflows, resulting in a shortage of liquidity, then the high debt ratio of the agency will bring big trouble.
        Emerging markets face risks the biggest to number, Kazakhstan, Turkey, Argentina, Brazil and other countries, because these countries the proportion of external debt and foreign exchange reserves to weak too high. Although China's November foreign exchange reserves remained at a high of $34383 billion, but fell during the year up $405 billion, more than 10 percent. Therefore, from a long-term point of view, the risk of domestic debt imbalances can not be taken lightly.
        6 fifth big trouble: triggered a global financial bubble burst, hit Chinese.
        In a recent period of time, the junk bond market accidents occurred one after another, three bond funds were liquidated, triggering the global bond market upheaval, and this is just the beginning.
        Panic is contagious. Every time the collapse of the bond market, are from junk bonds, and then spread to the normal bond market. At present, the Asian bond market has suffered, bond prices fell, the rise in yields. This is a tough time for the global bond market.
        With the official interest rate, control of monetary liquidity, the fragile global bond market will suffer defeat? this

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