China wants to decouple itself from the US Fed, but can it really pull it off?
Beijing is adamant it won’t dance to the Federal Reserve’s tune, but an analyst argues that it just might have to
Will the People’s Bank of China decouple itself from the US Federal Reserve and other major central banks? Beijing is trying hard to convince the market it will, but analysts think otherwise.
China’s monetary authorities will not follow the Fed in raising interest rates any time soon, as its economic recovery remains shaky and financial market sentiment is “sensitive”, the official Economic Daily said in a commentary on Monday.
The article came after Beijing shrugged off the Fed’s fourth interest rate hike in two and a half years last month, despite its previous two rate increases – at the end of 2015 and 2016 – triggering massive outflows of funds from China and a sharp depreciation of the yuan.
“China’s monetary policy will not dance to the Fed’s tune,” the commentary said.
While Beijing has avoided interest rate hikes, the People’s Bank of China has permitted a steady rise in money market rates. It has also imposed strict capital account controls to curb outbound payments and investments.