U.S. Federal Reserve Chair Janet Yellen

The U.S. Federal Reserve on June 14 raised benchmark interest rates by a quarter percentage point, signaling solid progress in the American economy. However, the Central Bank of China has not rushed to react, and does not intend to follow suit at this time.

On Thursday, the People’s Bank of China (PBOC) left the rates of open market unchanged, and injected a net total of 90 million RMB. The Chinese RMB hit a record high since last November, as the PBOC set the RMB-dollar parity rate at 6.7852, up by 87 basis points.

On June 15, PBOC conducted 150 billion RMB of reverse repos, comprised of a 50 billion RMB seven-day agreement, 40 billion RMB 14-day agreement and 60 billion RMB 28-day agreement. On the same day, 60 billion RMB of reverse repos contracts are set to mature.

Currently, China is under no pressure to raise its interest rates, analysts said. Since March, PBOC has made early moves to tighten its market liquidity. By constantly deleveraging and strengthening financial supervision, PBOC has already successfully raised the market interest rates.

According to Yu Yongding, a renowned economist and former adviser of PBOC, China only needs to stabilize its rates at present; there is no point in following the Fed.

“China has other tools at its disposal. As the expected rate hike by the Federal Reserve is no secret to the market, it will basically remain unaffected,” Yu explained.

According to a report released on Tuesday by Julian Evans-Pritchard and Mark Williams, economists specializing in China at Capital Economics, “PBOC is expected to stay on hold and keep rates stable for the next few quarters as China’s tightening cycle draws to an end.”

Capital Economics predicts that even if the Fed continues its tightening policy for a while, China will not raise its rates.