Someone has carefully calculated this.
Before the Federal Reserve cut interest rates, 7.3 million RMB was equivalent to 1 million US dollars. If deposited for one year, the interest rate was 5.25%. After one year, it became 1.0525 million US dollars. Converted into RMB at the exchange rate at the time, it was 7.68 million, which was equivalent to a profit of 380,000 RMB.
After the Fed cuts interest rates, capital will start to flow into China. One year later, assuming that the RMB appreciates (the current exchange rate is 7.04, conservatively calculated as 7), and the US interest rate becomes 4.75%, then 1.0475 million US dollars will be converted into RMB 7.3325 million, basically no profit or loss. But if the RMB appreciates to less than 6, then it will be a loss, you can think about it carefully.
As a result, those Chinese investors who hold a lot of US dollars and US debts may try to exchange US dollars for RMB, which will lead to capital repatriation, resulting in a shortage of RMB, and the RMB will naturally appreciate. There are three major issues involved.
The first question is, what is the country's expectation for the appreciation of the RMB exchange rate? The RMB must appreciate, but it must be stable and rise steadily and orderly, otherwise it will seriously affect trade. The country will definitely buy some US dollars to reduce the appreciation of the RMB. The key is that the exchange rate must be stable.
The second question is, how much capital inflow can the US icon control? The US can control the capital flow of some small fish and shrimp, but it cannot control the international big capital. Buffett icon can't control the capital inflow into Japan icon, let alone giants such as BlackRock icon, Vanguard, and State Street. Because the US government has no other real means except taxes and interest rates, and no actual capital. Goldman Sachs has already sent three M&A experts to Asia to be responsible for M&A business. You can imagine how much assets they are going to buy at the bottom, and they plan to double them in five years before leaving.
The third question is, can China fight against the US dollar capital? International capital is coming, and we have been prepared for it. Increasing the degree of openness means that international financial icon capital can enter the market, and our national capital can also enter the market. It depends on who has stronger capital. This is actually the power of one country against international financial capital. Of course, this is just the "technique" that can be seen. There is a series of "Tao" behind it, including policies and systems. In short, you can come as much as you want, it is good for us, but don't think about making money and running away. We must win together and not let you take it all.
Of course, this is a dangerous road, and if you are not careful, you may be doomed. It should be said that the second phase of the financial war has just officially begun, and we have managed to hold on in the first phase.
That's probably the situation.
