For the second year running, the US Federal Reserve has rudely interrupted the Chinese Communist party’s annual economic planning meeting, which ends today.
During last year’s Central Economic Work Conference, the Fed raised interest rates for the first time in a decade. This week the US central bank not only raised rates again but also hinted at three more increases next year, adding to pressure on Chinese officials already struggling to contain capital flight.
The rise and the prospect of further tightening next year mark a potential turning point for the world’s two largest economies. Over the past decade, high yields compared with rock-bottom Fed interest rates have drawn foreign capital into China. This fuelled the renminbi’s decade-long, 37 per cent appreciation against the dollar, which peaked in January 2014.