In the global financial landscape, the start of the Fed's interest rate cut cycle is like a boulder thrown into a calm lake, triggering a series of chain reactions. When the Fed cuts interest rates, it is common sense that a lot of capital should
Continue to seek opportunities in the asset sector of the United States, but the reality is that many capitals choose to leave the United States. There is a complex economic logic behind this phenomenon.
United States has always relied on the special status of the dollar and various financial instruments to attract global capital. This time, however, the situation is different. After the Fed cut interest rates by 50 basis points, China's central bank issued a "three arrows" policy in a row. The move was like injecting a strong dynamism into China's financial markets, with the A-share market showing a phenomenal performance, rising for seven consecutive days and recording the highest volume since 2015.
Originally, everyone was optimistic about the continued strength of China's stock market. But at this moment, the Fed suddenly made a new move. Powell made an urgent statement, saying that future rate cuts will likely be gradually reduced, possibly by only 25 basis points at a time. This move inevitably makes people wonder if the United States wants to cool down China's rising assets when it sees global capital flowing to China. It's like a strategic realignment in a financial war without gunpowder.
From the Fed's point of view, although the rate has been cut by 50 basis points, the interest rate in the United States is still between 4.75% and 5%, which is actually not low. This means that the Fed has only just reversed market expectations for interest rates, and the capital that was originally "plundered" abroad is not fully ready to redeploy the United States market.
Looking at China, the stock market surge is real. The Shanghai Composite Index has successively broken through important thresholds such as 3,000 points and 3,300 points. This makes Chinese assets an attractive piece of cake in the eyes of global capital. Not only is the A-share market hot, but the Hong Kong stock market is also favored by a large amount of capital, and even "bought out". This indicates that the attractiveness of Chinese assets in global capital allocation is rising sharply.
The rapid rise of Chinese assets has different impacts on different groups. Those who hold large amounts of Chinese assets are naturally overjoyed. And the United States, far across the ocean, is a little unable to sit still when it sees this situation. United States seems to have the upper hand in this Sino-US financial game. The Fed cut interest rates in an attempt to attract capital, but it turned out to flow to China in large quantities.
United States debt has been an important tool for attracting global capital. When the Fed cut interest rates to release a lot of liquidity, it originally hoped that capital would buy United States Treasury bonds, but now global capital is flocking to China to grab Chinese assets, and US bonds are at risk of no one buying them. The total amount of global capital is limited, and the more China attracts it, the less the United States will inevitably reduce. If the United States once again faces the dilemma that it is difficult to auction US bonds, the blow to its economy will be huge.
While China has attracted a lot of capital inflows, it has also reaped many benefits. China has been able to ride out the debt cycle at a faster pace, and its economy has ushered in new opportunities for development.
In this economic competition, China and the United States are actually competing for the position of the future global economic engine. In the past, the United States maintained its economic advantage by releasing water, but this method is no longer sustainable. If China can attract more global capital, United States' attempt to suppress China by borrowing from the world will be largely unworkable, and United States's own economic pressure will further increase.
Powell's retention of global capital is, in essence, just a means of struggle for United States. After all, the Fed has already formed a trend of cutting interest rates, and he just wants to control the pace of interest rate cuts a little. Judging from the overall situation, in the Sino-US financial game, United States is already in the defensive stage.
From the point of view of global capital, they choose to flow into a country because it can provide opportunities for capital appreciation and a safe environment. In the past, the United States was able to provide capital with this, so capital flowed into the United States in large quantities. But now the situation has changed. The United States model of plundering global wealth through the dollar tide to add value to capital has struggled to continue to work.
Compared with China, China has a unique advantage in the future artificial intelligence industry. China has formed a complete chain from theoretical innovation to industrial implementation.
Although the United States seems to have an advantage in the field of artificial intelligence, it actually faces many obstacles. For example, in United States general strike of port workers, workers refused to United States the introduction of automated terminals, in addition to demanding wage increases. This incident reflects the great difficulties in the implementation of the artificial intelligence industry in United States, while China does not have such great pressure.
As the world's largest manufacturing country, China will inevitably release huge dividends with the generation of new productive forces. Global capital needs to choose between staying in United States to participate in the financial game and flowing into China to add value in the manufacturing industry.
China has a large foreign exchange surplus every year, and in the process of United States interest rate hike before, many foreign exchange surpluses were left in overseas markets to United States eat the dividends of interest rate spreads, but now this dividend of United States is gradually disappearing. China's huge manufacturing market and relatively high rate of return have become an important basis for attracting capital.
On the other hand, the US Treasury bonds in United States look like they are not low in return, but the purchasing power of the US dollar is declining. This makes investing in the Chinese market more cost-effective in the long run. Moreover, China's huge manufacturing industry can carry huge capital inflows. Therefore, the Fed's shouting is more of a temporary reassurance.
In the long run, the high valuation of United States assets contrasts sharply with the low valuation of Chinese assets, and the Chinese market is more imaginative. If United States' hegemony is shaken again, the flow of global capital to China will be faster, because in the current international economic environment, the security of capital is a crucial consideration.
Against the backdrop of this financial game between China and the United States, the flow of global capital is undergoing profound changes. This change not only affects the economic development of China and the United States, but also has a profound impact on the global economic landscape.
For China, it is necessary to seize this opportunity, continue to optimize its financial market environment, strengthen the development of the real economy, especially in emerging industries such as artificial intelligence. For United States, it needs to re-examine its economic policies and industrial structure, otherwise it will gradually lose its advantage in this global capital competition. At the same time, for other countries, they also need to pay close attention to the financial game between China and the United States, and adjust their economic strategies to adapt to the new global economic pattern.
From the macro perspective of the global economy, this change in capital flows is also a manifestation of the law of economic development. In today's era of economic globalization, the economies of various countries are interdependent and competing with each other.
Capital always tends to flow to places with higher rates of return, safer and more potential for growth. China's performance in this financial game is the result of years of efforts in various aspects such as persisting in reform and opening up, developing the real economy, and promoting scientific and technological innovation. If the United States fails to adjust in time and continues to rely on the past model of economic hegemony, its position in the global economy will gradually decline.
In the future, the financial game between China and the United States will continue. China needs to actively respond to the various new measures that the United States may take while maintaining its own advantages. United States will also find ways to recover its own decline in global capital flows.
Global capital will continue to look for the best allocation opportunities between China and the United States and other countries, and this process will continue to shape the new global economic landscape, and all countries need to find their own position in the process to achieve sustainable development of their own economies.
In the process of global economic integration, the flow of capital under the financial game between China and the United States is only one of the important aspects. There are many other factors, such as the adjustment of international trade rules and the rise of emerging economies, which are also affecting the direction of the global economy.
However, it is undeniable that the current competition between China and the United States in the financial field and the flow of capital is a hot topic in the global economy, which deserves in-depth study and consideration by all countries in order to make correct decisions in the complex and volatile global economic environment.