Interest rate in China below the interest of the United States

Given the maturity of the North American economy and its long-term growth rate, it is expected that an economy with higher growth, such as China, would have an interest rate higher than that of the United States. Nevertheless, at certain times, the differences in the economic cycle and decisions on monetary policies adopted by the authorities of each country can lead to a situation in which the interest rate of the United States is higher than that of China.

This phenomenon, known as "reversion," is what has been observed recently in the interest rates between the United States and China. As can be seen in the graph, the Central Bank of China initially lowered its interest rate to stimulate economic activity, discouraged by the zero-COVID policy and later by difficulties in the construction sector. At the same time, the Federal Reserve decided to raise the interest rates in the face of rising inflation and a complex fiscal situation and has not yet begun to lower them, causing this unusual movement.

This situation regarding interest rates determines a significant change in the financing of Chinese companies, as obtaining external financing becomes more expensive and internal financing cheaper.