Why is China so afraid of US Fed’s interest rate increase?
Just look at what happened after the last time the Fed raised rates
Chinese authorities are putting on a brave face about possible interest rate increase by the US Federal Reserve on Wednesday, but it is probably the worst-kept secret in Beijing that the nation’s policymakers are anxiously watching the fallout from the Fed’s much anticipated decision.
The Fed is tipped to raise interest rates at the end of its two-day policy meeting on Wednesday.
Watch: US Fed increases interest rate by 25 basis points
Beijing has a good reason to be nervous because of happened to China after the Fed’s last interest rate rise on December 16, 2015 – its first increase for nine years – even though it can be argued that the Fed’s 0.25 per cent rise was not the only reason for what happened next ...
1. Yuan depreciation against US dollar deepened
The Chinese yuan’s depreciation against the US dollar noticeably accelerated after the Fed rate rise, even though the depreciation process had started as early as 2014 – in tandem with talks by Fed officials about the possibility of the US central bank tapering, or gradually reducing, its securities purchases.