In ‘finance war’ with US, former official says China risks staring down the barrel of a capital conundrum
- High-profile economist and former State Council researcher warns that potential US capital injections in China, following any Fed rate cuts, might be tumultuous for already-battered markets
- China is at a financial disadvantage and in ‘a state of being contained, suppressed and harvested’, Chen Wenling says
A former Chinese official has warned that the nation must steel itself in the midst of a “finance war”, and as anticipated interest rate cuts by the US Federal Reserve could lure a large amount of money back to China and potentially trigger fresh turbulence in the domestic financial market.
“We must prevent large-scale malicious speculation to harvest China’s high-quality assets or [the injection of US capital] causing trouble in the Chinese stock market,” said Chen Wenling, chief economist at the China Centre for International Economic Exchanges, a Beijing-based governmental think tank.
Chen, who worked as a senior official with the Research Office of the State Council from 1999-2010, made her comments in an interview with the Guancha.cn news portal this week.
Nonetheless, Chen expects that the world’s second-largest economy will be buoyed by a more vigorous capital market this year as foreign investors likely flock back to China due to interest rate trends.
But China should remain on guard, as it remains at a disadvantage in terms of financial competition with the US, Chen said.
“[We are] always in a state of being contained, suppressed and harvested,” she said. “The status of the US dollar is still there, and the strength of the US is still there. Any increase or decrease in interest rates by the Federal Reserve will have an impact on us.”