China | China-US rate gap is set to last longer amid FED “recalibration”

Summary

Diverging monetary policy between China and the US remains after Trump’s victory, leading to a longer time China-US policy rate reversion.

Key points

• Key points:
• The US FED "recalibration" indicates a significantly lower pace of rate cut in this year, from previously forecasted 6 times to 2 times in 2H 2025.
• On the other hand, China is conducting a jumbo size stimulus package to avert the economic malaise and trying to cut the policy rate further.
• The diverging China-US monetary policy suggests the CHina-US rate reversion will last longer, presumably till 2027.
• Rate reversion continues not only in China, but also in other Asian economies.
• Corporate financing for Chinese firms has got adapted to China-US rate reversion and changed the funding currency from cheap USD previously to cheap RMB.

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