In recent years, the performance of the United States in the global financial war has attracted widespread attention. Faced with the setbacks in the financial war, the United States seems unwilling to fail and tries to continue to exert pressure by modifying non-agricultural data and other means. However, whether it is raising or lowering interest rates, it seems that it is no longer a decisive factor. In this round of financial war, the offensive and defensive situation has undergone a fundamental change. The United States has completely turned from an offensive party to a defensive party, facing the dilemma of dragging itself down or inadvertently helping China's development.
The Fed’s Dilemma
The Fed’s policy adjustments have had a profound impact on global capital flows:
- Interest rate hike: US dollars flow back to the United States, attracting global capital to flow in and enjoy higher interest returns.
- Interest rate cuts: US dollars flow out, capital seeks higher returns, and investment opportunities increase.
Since the Federal Reserve began raising interest rates in March 2022, most economies around the world have chosen to follow suit to protect their assets. However, high capital costs have led to global industrial stagnation and recession, and only China has maintained rapid industrial development, becoming a bright spot in global economic growth.
China's new three pillars: the pillars of industrial rise
China has made remarkable achievements in the past two years by focusing on three major areas: shipbuilding, automobiles and large aircraft:
- Shipbuilding: China accounts for more than 70% of the world's new shipbuilding orders, demonstrating its strong strength in the field of marine engineering.
- Automobile: Export volume ranks first in the world and continues to grow, demonstrating the competitiveness of China's manufacturing industry.
- Large aircraft: Despite a late start, the company received 1,300 orders after its maiden flight, demonstrating the market’s confidence in China’s high-end manufacturing.
These achievements have not only consolidated China's position in the global supply chain, but also significantly increased employment rates and promoted overall progress in industry and technology.
The turbulence of the US dollar and the transfer of global capital
The Federal Reserve cut interest rates by 50 basis points in September 2023, triggering a wave of global capital reconfiguration. International capital began to turn to the Chinese market, seeking more promising investment opportunities. International financial giants such as JPMorgan Chase, HSBC, and Citigroup have all raised their ratings of China's A-shares and actively pursued Chinese assets, showing the market's confidence in China's economic prospects.
However, the United States reacted strongly to this, fearing that global capital would flow to China on a large scale to help its industrial and technological development. Fed Chairman Williams said that interest rates may not continue to be lowered in the future, and may even be raised, which shows that the United States is worried and regretful about the effect of the current monetary policy.
Data fraud and economic difficulties
The US has significantly adjusted its employment figures in the latest non-farm data, sparking global doubts. Although the US Department of Labor claims that it needs to adjust the data of previous months, the outside world generally believes that this is a manifestation of data manipulation. In fact, the surge in the number of bankruptcies of US companies, the troubled commercial real estate market, and the high cost of capital have made the US economy face severe challenges.
According to Epiq AACER data, the number of corporate bankruptcies in the United States increased by 72% year-on-year in 2023, and is expected to approach 100% in 2024. High borrowing costs and rising corporate bankruptcy rates reveal the fragility of the U.S. economy. At the same time, commercial real estate loans face huge risks of default, with more than $3.2 trillion in loans facing default in the next few years, further exacerbating economic instability.
Geopolitical and economic balance
The turbulence in the global situation also provides strategic opportunities for China. The conflict between Russia and Ukraine and the uncertainty in the Middle East have made global capital more dependent on China, a relatively stable economy. By strengthening its military strength and technological innovation, China has sent a clear message to the United States: in the midst of global turmoil, China will continue to adhere to its own development path and will not be disturbed by external pressure.
America's financial empire faces collapse
The United States uses finance as a means to plunder industry and commerce, attempting to weaken its opponents through financial warfare. However, this strategy has led to the collapse of its own economy under the current circumstances. The high national debt burden and rising interest payments have put the US government under tremendous financial pressure. At the same time, the dollar's dominant position in global capital flows is being weakened, and a large amount of capital is flowing to China, further accelerating the recession of the US economy.
The future direction of the global economy
In this financial war, the defensive posture of the United States has put it in a dilemma: either continue to increase financial pressure and eventually drag down its own economy; or attract global capital to China through interest rate cuts and other means, indirectly helping the rise of China's economy. No matter which path it chooses, the United States will find it difficult to get out of the predicament, while China is expected to occupy a more important position in the global economic landscape.
