News
Avalanche Alert: $1 Trillion Flooding China, Asset Appreciation Tide
Recently, the Federal Reserve's interest rate cuts have intensified, sparking widespread discussion.
On August 27, Stephen Jen, Chief Currency Economist at Morgan Stanley's London branch, warned that as the US dollar weakens, a large amount of capital will flow into China, causing a kind of "avalanche" in the currency market, thereby overturning the currency market.
In the past two months, the US Dollar Index has plummeted. On August 24, the index fell to 100.68 points, hitting a 13-month low.
Jen stated that with the Fed's rate cuts and China's economic reacceleration, it could lead to a sharp decline in the US dollar to Chinese yuan exchange rate, as Chinese companies rush to sell their unwanted US dollars.
A conservative estimate suggests that over $1 trillion in funds will flow into China.
$1 trillion is approximately equivalent to 7 trillion yuan in Chinese currency.
What impact would 7 trillion yuan flowing into China have?
Jen estimates that Chinese assets may be revalued.
The most interesting question is where this money will flow.
Will it flow into the commodity sector, thereby driving up prices?It is unlikely that this portion of money, which has the characteristics of investment arbitrage, will have much room to maneuver in the commodity sector.
Advertisement
Will it flow into the stock market?
It is possible.
Currently, both A-shares and Hong Kong stocks are at historical lows.
From an investment perspective, they are still very attractive.
The key question is: which companies will become targets?
Undoubtedly, companies that have consistently paid high dividends may have a certain appeal.
Additionally, there are some emerging industries with potential.
Will it flow into real estate?
It is possible.The current real estate market is sluggish, with housing prices in some cities having fallen by about 40% compared to their peaks.
In some cities, the rent-to-price ratio has exceeded 3%.
If one cannot consistently achieve a 3% return in the capital market, investing in real estate might be a good option now.
The real estate market is one where people buy on the rise, not on the decline.
Once housing prices show a slight increase, forming an expectation of rising prices, it will trigger a bandwagon effect, thereby quickly driving up housing prices.
If 2 trillion of the 7 trillion yuan flows into the real estate market, it is likely to become the spark for a new round of housing price increases.
Because once housing prices start to rise, money lying in banks will flood into the housing market like a flood or a beast.
The real estate industry chain is very broad, from steel and cement to decoration, and then to home appliances, every industry will feel the spring breeze.
Plus high-quality development in the fields of photovoltaic power generation, lithium batteries, electric vehicles, and low-altitude economy, China's economy is likely to take off again.
Seeing this, some people may disagree.How could the United States be so benevolent?
Lowering interest rates, allowing capital to flow into China, and revitalizing China's real estate and stock markets?
Yes, this is absolutely not the result the United States wants to see, and it is completely contrary to their original goal of raising interest rates.
The question is: Does the United States have a choice?
Can the United States resist lowering interest rates?
The answer is: The United States can no longer hold on, and if it continues to hold on, the U.S. economy may experience a hard landing.
What is a hard landing?
It's like falling from a great height, face down.
According to data released by the U.S. Bureau of Labor Statistics, in July, the United States added 114,000 non-farm jobs, far below the expected 175,000, and a significant decrease from the previous value of 206,000.
The unemployment rate rose to 4.3%, higher than the previous value of 4.1%, and also exceeded the market's consensus expectations.Expert evaluation suggests that the United States has missed the best time for interest rate cuts, with the economy on the brink of recession. If the Federal Reserve holds off on lowering interest rates for a few more months, it is highly likely that the U.S. will fall into a recession. At that point, even if interest rates are reduced, it would be too late to turn things around.
With a fiscal deficit of $1.7 trillion, a national debt of $35.21 trillion, a per capita debt of $104,000, and interest on the national debt of $1 trillion, if the U.S. economy experiences a hard landing, it will be in a dire situation from which it may never recover.
Historically, the collapse of great empires has been very tragic. The United States, burdened with debt and aggressive military actions, could experience a level of devastation that surpasses everyone's imagination.
If you don't believe it, just wait and see.
Leave a comment