The Federal Reserve has been delaying interest rate cuts and China is launching a "real estate defense war", and the Biden administration is about to swing a heavy blow to China, and US Treasury Secretary Yellen has given China a "preventive shot" in advance and called on China not to make a "major response".
The macro situation of China's economy is a concern for many people, which is closely related to each of us, although China's economy still has strong momentum and a solid foundation, but it is indeed facing both internal and external challenges. From the perspective of the external environment, the Fed still refused to cut interest rates in May this year, and it is likely that it will not officially cut interest rates until November this year, which has brought more pressure on the global economy. For China, this means that the renminbi exchange rate is under pressure and the Chinese economy is threatened by continued outflows of hot money. Coincidentally, this year is a year when China's real estate problems are more prominent, and the Fed's actions may be adding insult to injury.
As we all know, China's real estate market has developed rapidly in the past few years, which has made great contributions to China's economic development, but at the same time, it has also bred many problems, such as the deep bundling of people's assets and real estate values, and the extreme dependence of local fiscal revenue on land finance. However, even non-real estate professionals can understand that although there are many problems in China's real estate, it must not directly puncture the bubble, and China still needs to stabilize the real estate market. Judging from the professional data of the real estate industry, the share of new home sales of China's 100 largest real estate companies plummeted by 60% year-on-year in February this year, which is really a warning signal that cannot be ignored! Therefore, we will see that in the past few days, many cities have fully relaxed purchase restrictions, and the meeting of the Political Bureau of the Central Committee has emphasized the need to study and digest the stock of real estate as a whole. It can be said that China is waging a "real estate defense war", and China's economy is in a critical adjustment period.
At this juncture, China undoubtedly wants a stable foreign trade environment that boosts the economy by increasing imports and exports to better handle other economic issues, and the U.S. government does not seem to intend to keep China's foreign trade exports stable. Previously, many U.S. media released the wind, claiming that the Biden administration will soon launch high tariffs on Chinese new energy products, of which the tariffs on China's new energy vehicles will be increased to three times the current level, reaching 100%! Yellen came forward on May 13, not only hinting that this is indeed possible, but also giving China a "preventive shot" in advance, emphasizing that the new round of US tariffs is "targeted" and not universal, and said that she hopes China will not make a "major response" to it. What should we think of Yellen's statement?
In fact, translating Yellen's statement into the vernacular means that the US government is indeed ready to attack China, but only hit some of China's industries, hoping that China can not fight back, or at least be able to tolerate a little bit and not make strong countermeasures against the United States. Obviously, Yellen's set is completely hegemonic logic, why can the US government punch hard to China's new energy industry, while China has to swallow its anger? Moreover, if Biden raises tariffs on Chinese new energy vehicles to 100%, it is equivalent to completely excluding Chinese new energy vehicles from the U.S. market, which is unacceptable to China.
In short, although China does not want a "trade war" with the United States, if the United States puts a knife on China's neck, then China can only retaliate. The Biden administration must not underestimate China's ability and willingness to retaliate, and some of China's toolbox are trade tools to counter the United States, such as reducing imports of American agricultural products or imposing higher tariffs on American goods. Although Biden's purpose in initiating tariffs on China this time is largely to curry favor with American voters with protectionist tendencies, he should not forget that if China takes "major countermeasures" to make the American people feel the economic consequences, then angry American voters may not easily let the Biden administration go.