Chinese assets surge! The Golden Dragon Index rises by 3.50%, and the offshore RMB appreciates by 600 basis points against the US dollar

On November 8th, Beijing time, the Federal Reserve announced at the Federal Open Market Committee (FOMC) meeting that it would lower the target range for the federal funds rate by 25 basis points to between 4.5% and 4.75%. This marks the second rate cut by the Federal Reserve this year and the second since March 2020, signaling that U.S. monetary policy has officially entered a loosening cycle.

In its statement, the Federal Reserve indicated that recent indicators show economic activity continues to expand at a robust pace, the labor market has generally eased, the unemployment rate has risen but remains low, and inflation has made progress towards the 2% target, although it is still somewhat elevated. The FOMC seeks to achieve full employment and a 2% inflation rate over a longer period, assessing that the risks to achieving employment and inflation targets are roughly balanced. However, there is uncertainty in the economic outlook, and the FOMC remains attentive to the risks it faces in its dual mandate.

Compared to the rate cut meeting in September, the statement from this meeting has moderated its language regarding inflation, removing the phrase "more confident in inflation's continued march towards 2%." Additionally, the FOMC slightly adjusted its wording on the labor market, stating that labor market conditions have generally eased, rather than saying that job growth has slowed.

Federal Reserve Chairman Jerome Powell stated at the post-meeting press conference that the overall economic performance is strong, and the Federal Reserve has taken a new step in reducing policy restrictions. He emphasized that the labor market is not the source of inflationary pressures, and while the pace and targets of monetary policy may change, no decision has yet been made regarding what policy actions will be taken in December. Powell also stated that he has no intention of leaving the Federal Reserve before May 2026.

U.S. Stock Indices Hit Record Highs

The market reacted enthusiastically to the Federal Reserve's rate cut. Following the announcement, all three major U.S. stock indices reached record highs. The Dow Jones Industrial Average closed flat, while the S&P 500 and NASDAQ indices rose by 0.74% and 1.51%, respectively. Notably, the NASDAQ index closed above 19,000 points for the first time, and the S&P 500 index approached the 6,000-point mark.

In addition, major U.S. tech stocks surged, with the Wind U.S. Technology Seven Giants Index rising by 2.06%. Among individual stocks, Meta rose over 3%, Tesla increased by more than 2%, Alphabet (Google's parent company) climbed over 2%, NVIDIA gained over 2%, Apple rose over 2%, Amazon increased by more than 1%, and Microsoft rose over 1%.

Chinese Assets Perform Brightly Chinese assets performed impressively after the Federal Reserve's interest rate cut. The NASDAQ Golden Dragon China Index rose more than 4% at one point during the day, ultimately closing up 3.50%. Among the major constituents, Meituan rose 8.87%, and JD Group increased by 6.62%.

Both onshore and offshore Renminbi (RMB) against the US dollar saw significant increases, with the onshore RMB closing at 7.1455, up 341 points from the previous trading day's night session; the offshore RMB was reported at 7.1415, up 621 points from Wednesday's New York close.

In the long term, the core driving force behind China's economic growth lies in innovation and industrial upgrading. With continuous advancements in technology, emerging industries such as artificial intelligence, biomedicine, and new energy are flourishing. These industries are characterized by high added value and low energy consumption, making them important engines for future economic growth. At the same time, the digital transformation of traditional industries is also accelerating, enhancing production efficiency and competitiveness through the application of new technologies such as big data, cloud computing, and the Internet of Things.

However, there are also some potential risks in the process of economic development. One of them is the debt issue, including government debt and corporate debt. Excessively high debt levels may increase fiscal and financial risks, so it is necessary to reasonably control the scale of debt and optimize its structure. Additionally, uncertainties in the global economic situation and trade frictions may also negatively impact China's economy. In addressing these potential risks, it is essential to strengthen macro-prudential management and enhance the resilience and risk resistance of the economy