It May Be A Disaster For China To Raise Interest Rates For A Year.

The data released on Thursday showed that the economic boom continued to grow. For example, in October, the consumer price index rose for 3 consecutive months. The US Department of labor announced that the consumer price index (CPI) increased by 0.4% in October, which was in line with market expectations. After the deduction of food and energy, the core CPI increased by 0.1%, which is lower than the estimated 0.2% increase in the market.

Compared with the same period last year, CPI increased by 1.6%, and core CPI increased by 2.1%, the largest growth rate in 2 years, and slightly higher than the 2% target set by the Federal Reserve for the annual inflation rate.

Reflecting the steady growth of the US economy.

In particular, the rise in gasoline and residential consumption makes inflation pressure continue to increase.

In October, CPI grew by seventh months in the past 8 months, and its growth rate is accelerating.

In his testimony, Yellen warned that too late interest rates would have a serious negative impact on the economy, such as the sudden need to prevent economic overheating in the future, and that maintaining interest rates for too long would lead to high risk in the market and jeopardize the stability of financial markets.

Therefore, more than 90% analysts in the market think that the Federal Reserve will raise interest rates in December.

Yellen, chairman of the Federal Reserve, attended the Joint Economic Committee's hearing on Thursday, saying that the US economy is growing moderately, and that the timing for raising interest rates has been "pretty close" (relativelysoon), suggesting that the rate of increase in interest rates will be high next month, but she stressed that the rate hike will be gradual.

It can be said that this is the first time this year that Yellen has made it clear that the timing of raising interest rates is close. In December this year, the Fed's rate hike is expected to be difficult to reverse.

So when the news was introduced into the market, the US dollar exchange rate index hit a new high of 14 years, and the US stock market was also stable.

Last week, the number of people receiving unemployment benefits reached a new low of 43 years.

Last week (until November 12th), the number of initial jobless claims dropped by 19 thousand people, which dropped to 235 thousand after the quarterly adjustment, far below the market forecast of 255 thousand people, a new low since November 1973, and a 300 thousand week low for 89 consecutive weeks, keeping the record below that level for 1970.

In October, the number of new housing starts unexpectedly rose and hit a 9 year high, indicating that housing demand grew steadily.

The US Department of Commerce announced that the number of new housing starts increased by 25.5% in October, reaching an annual rate of 1 million 323 thousand, up from 1 million 200 thousand households predicted by the market, reaching a new high in 2007.

The number of households in September has also been adjusted from the original 1 million 47 thousand households to 1 million 54 thousand households.

All these data indicate that the housing demand in the United States is growing steadily, which means that the income growth of residents is continuing.

It is these bright data that add to the Fed's interest rate hike in December.

The problem now is,

Interest rate hike has been hovering for a year. If the interest rate rises next month, how much impact will it have on the international market?

We should also remember that the Federal Reserve issued a signal tightening monetary policy since the mid 2014.

It is also from this time that the global market's rapid flow of nearly 18 trillion US dollars immediately reversed, which not only caused a huge shock in the international market, but also changed the interest pattern of the international market as a whole.

For example, the price of international crude oil and commodities began to plummet.

Because in the current international monetary system dominated by a credit currency and a US dollar, the US monetary policy is aimed at both the domestic economic situation and the global monetary policy, which will have a huge impact on the global market.

It can be said that if the Fed raised interest rates in December, it meant the US.

It will further tighten up. Although the tightening of monetary policy will be gradual, it will lead to global capital flows to the US dollar or dollar denominated assets, especially in emerging markets.

Due to the recent strength of the US dollar, the outflow of funds in Hongkong, Taiwan, Korea, Indonesia and other Asian regions is even more obvious.

The flow of funds in these areas will naturally lead to huge shocks in the stock market, foreign exchange market and bond market.

The recent decline in the stock market in Hongkong is related to the massive outflow of such funds.

If we look at the basket rate of RMB, the dollar is not comprehensive.

The depreciation of the RMB exchange rate is also very natural.

However, for domestic residents and investors, the Chinese government's double anchor to the RMB exchange rate does not mean that the residents' investment is also taken as the benchmark.

Most of them are based on changes in the US dollar.

If the US dollar continues to be strong, and the RMB exchange rate will continue to depreciate (over a year has depreciated more than 10%, this year's depreciation will reach nearly 6%).

This will also cause huge fluctuations in asset prices in China, such as the massive outflow of funds, which is neither conducive to the stock market nor to the property market.

Therefore, the United States increases interest rates, China is not a Shangri La, and vice versa, the impact will be huge, but for China such a big market, sometimes it is not so obvious, but smart domestic investors have long been concerned about this.

For example, this year's massive flood of funds into Hongkong to buy stocks, insurance, housing and so on is the best evidence.

That is to say, if the Federal Reserve raises interest rates next month, the domestic people can not be belittled at all. They think they have nothing to do with themselves, but in fact, they will also bring great impact. But this kind of impact is not so direct because China's capital account has not been released and the RMB can not be freely convertible, but in fact, the impact of this warm boiled frog style really makes domestic investors feel that it will be reflected later. It is too late.

Chinese residents and investors should be prepared. The global allocation of their assets is a good choice.

Therefore, the United States increases interest rates, the Chinese market is not a Shangri La.