At a critical juncture, the United States launched a financial war against China!
The contest between China and the United States is mostly a geopolitical, diplomatic and military contention on the table. But there is one area in which it is not only about life and death, but we also have personal experience, but we rarely pay attention to it, and that is the financial war between the major powers.
Just recently, the United States launched a new round of financial warfare against China, sounding the clarion call to charge, trying to force China to comply!
A few days ago, U.S. Treasury Secretary Janet Yellen started a visit to China while threatening China. Why is the US Treasury Secretary here? On the surface, he is here to discuss cooperation, but in essence, he wants to use the method of threatening China to force China to buy US bonds on a large scale. Because the current U.S. bonds are facing a situation where they cannot sell them all.
When it comes to U.S. bonds, China used to be the largest holder of U.S. bonds, but over the past decade, China has been reducing its holdings of U.S. bonds, despite its growing trade surplus. There are two main reasons for the reduction of holdings: one is that the United States has been frantically encircling and suppressing China since 2010, and China has not had good relations with China, and of course China has reduced its purchase of U.S. bonds; the other is that the United States has been frantically issuing bonds since 2007, which has caused the systemic risks of U.S. bonds and the U.S. dollar to continue to accumulate, and China has to reduce its holdings to avoid risks.
In 2007, when the subprime mortgage crisis broke out, the United States began to accelerate the issuance of bonds to hedge against the crisis, and the U.S. debt only exceeded $9 trillion after the subprime mortgage crisis. In 2008, the subprime mortgage crisis in the United States triggered the global financial crisis, and the United States continued to issue bonds on a large scale, and the size of the U.S. national debt exceeded 10 trillion U.S. dollars. In the more than a decade since then, the United States has issued a large number of U.S. bonds through rounds of quantitative easing, and the scale of U.S. bonds has continued to grow, reaching $34 trillion by the end of 2023. Today, the US debt is growing at a rate of $1 trillion every 100 days and will reach $35 trillion by May 2024.
Due to the large scale of U.S. bond issuance, although the interest rate of U.S. bonds is high, it is still impossible to sell completely, and the market demand is not so large, so up to 25% of U.S. bonds are facing sales difficulties. It is against this backdrop that Yellen visited China while threatening China, trying to force China to buy large sums of U.S. Treasury bonds to help the United States out of its predicament.
Has China complied? Of course not. Not to mention the bad things that the United States has done to China over the years, it is impossible for you to say in this world that while harming other countries, you want other countries to help you, and you really have to do these things from a position of strength, and your current strength in the United States is not enough, right? The latest data shows that China has reduced its holdings of U.S. bonds in the first two months of 2024, including $27.7 billion in February, and its current holdings are $775 billion, nearly half of the peak of China's holdings of U.S. bonds in November 2013, when they reached $1.32 trillion.
It is against this background that the United States has recently launched a financial war against China and has made three moves in a row:
The first move: Fitch downgraded China's sovereign credit rating from stable to negative again, and lowered the rating outlook of six Chinese state-owned banks to "negative". China's economy is the fastest growing among the world's major economies, inflation is the lowest, and Chinese commercial banks are much healthier than U.S. commercial banks with far fewer bad debts and adequate reserves than U.S. banks. However, the United States has downgraded China's sovereign credit rating and commercial bank rating, which is obviously a clarion call for financial warfare, and the purpose is to short China. Chinese Foreign Ministry spokesperson Mao Ning said at a regular press conference on the afternoon of April 10 that the basic trend of China's long-term economic growth has not changed, and China's determination and ability to safeguard its sovereignty and credibility will not change.
The second move: short the renminbi to hit the confidence of the international market in the renminbi. Recently, there has been an obvious change in the renminbi, and it is clear that some people want to deliberately suppress the renminbi. However, it is clear that they have not been able to suppress it, there is not such a large scale of funds, and the yuan has only fallen slightly. In general, the renminbi is relatively stable.
The third trick: insist on not cutting interest rates, or even announce interest rate hikes. As we all know, due to the high cost interest that banks need to pay due to the Fed's interest rate hikes, three consecutive bank failures in the United States last year were short, and finally the Fed used "magic" to keep it from forming a domino effect. However, this also effectively seals the Fed's room to raise interest rates. However, the US economic growth rate and inflation rate are still seriously inverted, and the US GDP growth agency is expected to reach 2.4% in the first quarter, but its CPI is still high. In March, the US CPI continued to rise by 0.4% month-on-month and 3.5% year-on-year, and the core CPI reached 3.8% year-on-year, nearly 50% higher than its GDP growth rate. In stark contrast to the United States, China's CPI grew by 0% year-on-year in the first quarter, the same as last year, but China's GDP growth rate in the first quarter was as high as 5.3%.
Against this background, if the United States does not cut interest rates, it will continue to pay high interest rates, and the Federal Reserve and US commercial banks will continue to bear tremendous pressure; if China does not buy US Treasury bonds in large sums, no one will buy US bonds, the US finances will collapse, and the government will face the dilemma of shutting down. The U.S. threat to China not to cut interest rates means that if a large amount of capital flows from China into the U.S., then China's economy may collapse. However, the Fed has raised interest rates to a level of 5.25-5.5%, China's interest rates have not even moved, and even cut them, and the situation is now that the United States itself cannot stand high interest rates first. If the United States continues to raise interest rates now, China's economy will definitely not explode, but the U.S. economy will definitely explode, otherwise the Federal Reserve would have continued to increase it a long time ago.
In order to cut China's leeks, the United States has stubbornly held interest rates, but he has no ability to raise interest rates sharply, China's economy is strong, and it is not afraid of US interest rate hikes. In order to scare China, the CEO of the largest bank in the United States even threatened that the Federal Reserve will not only not cut interest rates, but may also raise interest rates to 8%. Fed Chairman Jerome Powell is much more moderate than the CEO of the largest US bank, saying that the US is not in a hurry to cut interest rates for the time being.
At the same time, if no one buys US bonds and the economy cannot go up, then I am afraid that the whole plate will not be able to hold back! Think about it, the current state of the US economy is like this, but it has turned China's economic development to a negative level and lowered the credit ratings of China's state-owned banks.
China released data to meet the enemy, and the key node won two games in a row!
Just when the United States launched its financial war against China, China released its GDP data for the first quarter, with a growth rate of 5.3 percent! This rate was 0.8 percentage points higher than the 4.5 percent growth rate in the first quarter of last year. In the first quarter, the GDP growth rate of the United States is estimated to be 2.4%, which may not be reached, while the growth rate of the European Union is only 1.3%, of which the GDP growth of Germany, the leader of the EU economy, even experienced negative growth again. China's GDP growth rate of 5.3% can be said to completely crush the United States and Europe.
In terms of inflation rate, China's CPI in the first quarter turned out to be 0%, flat year-on-year; the CPI in the United States in the first quarter must have exceeded 3%, and its March data was as high as 3.5%, and the Fed has not yet cut interest rates, and inflation is again; although the EU CPI data has not yet been released, it is even worse than that of the United States, and the preliminary year-on-year value of France's harmonized CPI in April rose from 6.7% in March to 6.9%, and the Spanish CPI rose to 3.8% from 3.1% in March, and other countries are not much better. The president of the European Central Bank also boasted in Paris a few days ago that the ECB has made a lot of progress in dealing with stubborn and persistently high inflation, and inflation in the eurozone has fallen from double digits to 6.9%. She is also right, the EU inflation was in double digits last year, and there is still an inflation rate of 6.9% after the decline, which is indeed not easy for the EU. To put it bluntly, the economic growth of the United States and Europe is not good, and the GDP data is all based on inflation data, which is completely different from China's solid growth.
The absurdity of the World Bank's data can also be seen in this. The World Bank estimated that the U.S. economy will grow by 1.6 percent in 2024, the eurozone at 0.7 percent, and emerging markets and developing countries by 3.9 percent this year, with China at around 4.5 percent, down from 5.2 percent in 2023. But in fact, China's data for the first quarter has already slapped the World Bank in the face, and in the end, China's GDP growth rate this year will definitely exceed the World Bank's projections.
Please note that when the World Bank estimates China's economic data, it has always been much lower at the beginning of the year, and then he was constantly slapped in the face by China's economic data, and he kept revising it until the end of the year, when the data was basically determined, and his revised data was similar to China's official data.
However, then the World Bank played a trick of whitewashing Western economic data, saying that if inflation is factored in, the current GDP growth of the United States in 2024 can reach about 4.6%, the current GDP growth of Europe will be about 4.2%, and the current price of China's GDP will increase by about 3.5%. The higher the inflation rate, the higher the GDP, and at the current price according to the World Bank, the EU's GDP growth rate is higher than China's. However, even at current prices, China's CPI in 2024 will only increase slightly, and how can the current GDP price data be only 3.5% when China's GDP growth rate is as high as about 5%?
As a matter of fact, all this is part of the financial war! It is just a means for the United States and the West to suppress China!
If data is just data, then China's data in related fields is even more ruthless to the United States and the West.
On the one hand, China has crushed the industries of the United States and the West in the field of the "new three things". According to data from the General Administration of Customs, in the first quarter, the mainland's electric manned vehicles, lithium batteries, and solar cells, commonly known as the "new three", exported a total of 264.69 billion yuan, a year-on-year increase of 66.9%, accounting for a year-on-year increase of 1.7 percentage points in the mainland's exports, reaching 4.7%. Among them, the export of electric manned vehicles was 64.75 billion yuan, an increase of 122.3%, the fastest growth rate in the "new three", and the proportion of mainland automobile exports increased by 5.1 percentage points to 43.9%. At the same time, driven by multiple factors such as strong demand for foreign electric vehicles and energy storage markets, the export of lithium batteries reached 109.79 billion yuan, with a growth rate of 94.3%, and the export of solar cells exceeded 90 billion yuan.
On the other hand, Chinese chips have also begun to exert force, driven by cars and mobile phones. According to the South China Morning Post reported on April 18, China's total chip production in the first quarter of this year soared 40% year-on-year to 98.1 billion, indicating that China's mature process chip production capacity is rapidly expanding under the restrictions of the United States on the development of advanced processes. According to the latest data released by the National Bureau of Statistics on Tuesday, in March this year alone, the national output of integrated circuits increased by 28.4% to 36.2 billion, a record high. Chinese mainland's chip manufacturing has grown sharply, accompanied by a sharp contraction in Taiwan's chip exports to the mainland. Since last year, Taiwan's chip exports to the mainland have begun to decline sharply. At the same time, the situation of South Korea's Samsung is also very bad, Samsung Electronics released the financial report data for the whole year and the fourth quarter of 2023, and the annual operating profit fell by 84.86% year-on-year, refreshing the lowest record since the 2008 financial crisis.
In fact, the explosion of chip manufacturing in China is only the beginning, because China has built dozens of chip manufacturing factories in the past two or three years, and these factories are far from full capacity. Moreover, places that use a large number of chips, such as automobiles, are not chips that necessarily require advanced processes like mobile phones, and a large number of chip markets and profits are actually concentrated in mature processes. Now, China has captured 60% of the market share of mature processes, and this proportion is rising rapidly. Judging from the cost of China's manufacturing industry, the price of chips will soon be dried up by China to the price of cabbage, and the United States' purpose of suppressing China's technology and China's economy through sanctions will inevitably go bankrupt, and soon the big stone he lifted will be smashed on his own feet and those of his allies.
At the same time, we must also see that the launch of Huawei's 5G chips shows that we have been able to manufacture high-end chips with a process below 7nm in batches, and the United States can no longer limit us.
In addition, we should also see that China, China's large aircraft are being mass-produced, and the high-tech fields that the United States and the West originally monopolized have all been broken through by China. What does the improvement of labor productivity depend on? In the early stage, it will rely on the demographic dividend, and in the future, it will depend on the empowerment of the industry by science and technology and a complete industrial system. The sustainable growth of China's economy is supported, such as the automobile industry, the chip industry, the new energy industry, the large aircraft industry, etc. are all high value-added industries, these industries come up in China, the United States can no longer contain us, and our economy will inevitably have more room for take-off in the future!
China's economic strength has just been demonstrated, and it won't take three years for us to look at it, and it will be a different world from today!
Source: Zhanhao WeChat public account