Source: Bloomberg

During the year of the trade war, China found a way to avoid the United States' various restrictions on its economy -from the restrictions on the latest mobile phone chips to Iranian oil sanctions.But even in Beijing, it cannot easily get rid of the gravity of the Federal Reserve.

Economists have learned two lessons from China's economic data this week.First of all, although the pace of economic growth earlier this year, more stimulating measures may be needed.Secondly, the People's Bank of China is becoming more and more difficult to achieve this goal by reducing interest rates.

The reasons are as follows: Although China is fighting deflation, the United States is stubborn, and the Fed will postpone interest rate cuts. This has made the rate difference between the 10 -year Treasury bond and Chinese Treasury bonds hit a record high.If China is trying to defend the RMB, if the interest rate cuts, it will further expand this gap and make the downturn.

BCA Research Inc. Chief Emerging Market and Chinese investment strategist Arthur Budaghyan said the government currently attaches more importance to exchange rate stability.

If the Federal Reserve's erratic interest in interest rate policy will cause headaches in the world's second largest economy, imagine what the Bank of the United States has done in other places.

Morgan Stanley economists pointed out this week that as the Fed's delayed relaxation policy, most Asian central banks will start the interest rate cut this year to be later -if interest rate cuts.

Even after the first increase in interest rates in the Bank of Japan in 17 years, the yen has fallen to a new low in 34 years. From Indonesia to South Korea and other countries, it has also been involved to support the local currency.

The People's Bank of China has not adjusted the one -year policy interest rate of 2.5%since August. Although the consumer prices of residents have not risen, industrial producers have fallen for 1.5 years.Economic growth is picked up by industry and exports, and family expenditures are suppressed due to the real estate crisis. A cheaper credit will help support domestic demand.

But since last year, defending the RMB has a higher priority than ever.The Political Bureau of the Central Committee held a meeting in July last year, and China's Supreme Leadership promised to maintain the RMB exchange rate for basically stability; Chinese President Xi Jinping emphasized earlier this year that the financial power must have a series of key core financial elements, that is, China needs "strong currency"Essence

When Beijing is keen to enhance the global status of RMB, the fluctuations of the RMB may weaken investors' confidence in Renminbi.Considering China's economic scale, the use of RMB in international trade and reserve management is low.The People's Bank of China is also cautious about the outflow of capital that causes the depreciation of the RMB in 2015.The central bank had to use foreign exchange reserves of $ 1 trillion (S $ 1.3 trillion) to stop capital outflows.

All of these have prompted the central bank of China to use intermediate prices since the end of last year.TS Lombard said that the middle price is equal to a line at a level of $ 1.32 yuan.

Many analysts predict that this strategy will continue, although the central bank has caused intermediate prices to break the narrow range this week.

Absolute Strategy Research, an emerging market economist Adam Wolfe, said that the People's Bank of China may hope that the market can help as much as at the end of 2023. At that time, the US dollar was softened, and the People's Bank of China could stop intervention.

Defending the RMB means that the People's Bank of China has to take other tools to implement currency looseness, rather than a measure that affects RMB more directly.

Officials have issued signals and have a space reduction.The People's Bank of China has also established 500 billion yuan (S $ 93.9 billion) scientific and technological innovation and technological transformation and re -loan to support financing in related fields.

Wall Street analysts are postponing the possible date of interest rate cuts at the People's Bank of China.Morgan Stanley economists will be postponed from the second quarter to the third quarter.UBS no longer predicts that the central bank will reduce MLF interest rates during the year.

Bloomberg Economic Research

The strong CPI in the United States in March has caused the Federal Reserve to further delay interest rate cuts. The People's Bank of China may want to avoid becoming the first central bank to cut interest rates this year, and interest rate cuts may accelerate the downward pressure of the RMB.