The Impact of the U.S. Rate Hike Cycle on China's Financial Market

Abstract

The essay looks at how the changes in exchange rates in the United States affects financial markets’ performance in China.  First, the paper gives an overview of the dollar as a global exchange rate currency vis-à-vis financial markets’ productivity. Then, the essay analyses the impact of US rate hike on yield gap, capital flow, the RMB, government bonds, and housing & real estate before drawing conclusions: the US rate hike will attract a huge amount of funds back to the United States, assert depreciation strain on the RMB, and effectively limit Beijing's fiscal policy softening, as an essential tool for assisting coronavirus-hit industries and meeting the government's estimated growth target.