The Impact of Fed Rate Hikes on The Chinese Economy

Abstract

The United States is the world's largest economy and a major financial center. As the central bank of the United States, the Federal Reserve's monetary policy decisions not only have a significant impact on the country's economic and trade development, but also lead to changes in global capital flows, exchange rate fluctuations, and international trade conditions. Since March 2022, persistent high inflation and overheating of the economy have led the Federal Reserve to raise interest rates dozens of times. As of September 2023, the Federal Reserve's interest rate has increased from 0 to 5.5%. The total rate hike by the Federal Reserve has reached 550 basis points. As the US dollar is the world's reserve currency, China's economy inevitably experiences varying degrees of impact. Therefore, studying the impact of the Federal Reserve's rate hikes on the Chinese economy will help our country formulate better response measures and reduce its adverse effects on our economy.