The impact of European interest rate hike on China: 1. With the narrowing of internal and external interest rate spreads, the pressure will be reduced.
To ease rising inflationary pressures, interest rates have been raised four times since October ahead of advanced economies such as the US, Japan and Europe, creating a large internal and external gap.
With the introduction of the interest rate hike policy in the Eurozone, the market’s expectation that developed economies will enter an interest rate hike cycle is becoming stronger and stronger, which will prompt some international capital to take a wait-and-see attitude and exit China early.
As a result, the upward pressure will be reduced.
2. Expand China’s operating space.
Although the orientation of China’s policies is largely based on the domestic economic situation, there is no denying that the curse of the “triple paradox” affects the actual room for manoeuvre.
That is, the independence of monetary policy, stability and full mobility of capital around the world.
Of these, a country can only choose two, not both.
3. Inflationary pressure from China’s imports will not ease in the short term.
As interest rates rise, the euro strengthens and global inflation expectations intensify, which will inevitably feed through to China.
