US Fed rate hike bad news for China

The US Federal Reserve’s interest rate hike and its suggestion that it will accelerate such moves in the coming years have cast a shadow on prospects for the Chinese economy and are expected to prompt Beijing to take further measures to curb capital outflows, according to Caixin. The Fed on Wednesday decided to raise the federal funds target rate by a quarter percentage point to a range of 0.5% to 0.75%. The announcement sent the central parity rate of the yuan, set by the People’s Bank of China, to 6.9289 to the dollar on Thursday, its weakest since June 2008. Analysts expect the yuan to be under continued pressure to depreciate, and Chinese policy makers, who are grappling with the problem of money fleeing the country, may move to further step up capital controls.