Abstract
Facing the pressure of high CPI, the interest rate hike process has initiated by the Federal Reserve (Fed) in the context of the global economic downturn in 2022. This adjustment in the Federal Reserve's monetary policy has a significant influence on the global economy, including China. This article focuses on the spillover effect of the Federal Reserve's interest rate hike policy on Chinese economic development. It will first review the historical background and impact of the four interest rate hikes cycles in the Unite States since 1994. And then the analysis of the impact is presented in three different transmission channels: interest rate channel, exchange rate channel, and capital flow channel. After that the policy suggestions on how to deal with the spillover effect is provided. Lastly, this article concludes that even though the spillover effect of interest hike policy continues to put downward pressure on Chinese economy, it is shrinking with China becoming more independent in implementing its monetary policy.
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