Recently, the US dollar is set to lower interest rates, and foreign capital is starting to act up again.

Will more dollars be coming in?

Is this a good or bad thing?

The tough times we've had in recent years have proven that Americans can never have good intentions.

Even if the dollar does cut interest rates, Americans will definitely not let us have it easy.

What do we need to be vigilant about at this time?

Let's first look at two unusual events that have occurred recently, which many people may not have understood.

The first event, against the backdrop of the impending interest rate cut, the dollar is continuously flowing into China.

According to the data from the State Administration of Foreign Exchange, in July, the inflow of dollars into China's cross-border transactions, converted into RMB, was 1.9337 trillion yuan, and the outflow of dollars, converted into RMB, was 1.8191 trillion yuan, resulting in a net inflow of dollars for the month, converted into RMB, of 114.6 billion yuan.

The key point is that the net inflow of dollars has been sustained for several months now.

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What does this situation indicate?

In June of this year, the net inflow of dollars was 95.2 billion yuan; in May, it was 173 billion yuan; in April, it was 101.8 billion yuan; in March, it was 80.6 billion yuan; in February, it was 132.5 billion yuan; and in January, it was 130.3 billion yuan.

In the first seven months of this year, the total net inflow of dollars reached 828 billion yuan, setting a new record in recent years.

Conversely, in the first seven months of this year, the net outflow of RMB was 553.4 billion yuan.

How should we understand the continuous net inflow of dollars?

Simply put, on one side, there is a net inflow of dollars exceeding 800 billion, and on the other side, we are sending out more than 500 billion yuan in RMB.

This reflects the vibrancy of our country's foreign trade and investment.

Foreign trade has brought back a lot of dollars, with a trade surplus of 518 billion USD in the first seven months of this year, a year-on-year increase of 7.9%.

At the same time, a lot of RMB has been spent on foreign investment, and these RMB are then used to purchase Chinese goods, forming a healthy cycle.

Ensuring that more countries have RMB to buy Chinese goods is one of the significant meanings of RMB internationalization.

Therefore, the continuous net inflow of dollars does not mean that dollar capital has come in advance; it only indicates that our foreign trade growth is solid.

The second event, against the backdrop of the recent surge in the RMB, the enthusiasm of foreign investors to allocate RMB assets has increased, and foreign capital has significantly increased its holdings of domestic bonds.

According to the data from the State Administration of Foreign Exchange, in July alone, foreign capital net increased its holdings of domestic bonds by 20 billion USD, a month-on-month increase of 1.4 times.

To understand this simply, it means that under the big background of the dollar's upcoming interest rate cut and the bullish outlook for RMB assets, some foreign capital has started to lay out in China in advance.

They first enter the relatively stable bond market, waiting for the right moment.

In addition, this sudden surge is also related to the significant drops in the US and Japanese stock markets at the end of July and the beginning of August, with some foreign capital entering the Chinese bond market to hedge risks.

These two events, if they happened at other times, would not be a big deal, but they occurred simultaneously with the dollar's upcoming interest rate cut, which requires us to be vigilant about two things.

The first thing is to be vigilant about the continuous devaluation of the dollar, causing losses.

If the dollar begins to cut interest rates, the US dollar index will fall, and the dollar will continue to devalue.

It is difficult to predict how much it will devalue.

Many of our banks and enterprises have worked hard to earn a lot of dollars.

If they hold onto them, they will devalue accordingly, and the dollar interest rates will also decrease.

This means that the more dollars held, the greater the losses will be.

The second thing is to be vigilant about the potential turmoil in the financial market.

As we mentioned earlier, the large-scale increase in foreign capital holding Chinese bonds is partly for risk aversion, but the more important purpose is likely to be waiting for the opportunity to bottom-fish in RMB assets.

This is like capital lying in wait; these dollar capitals can come out of the bond market at any time to bottom-fish for assets they have identified as undervalued.

Additionally, if foreign capital comes out of the bond market on a large scale, it could cause a short-term decline in bond prices and market turmoil.

Therefore, the dollar's interest rate cut, on the one hand, triggers drastic changes in the flow of international capital, and on the other hand, triggers drastic changes in asset prices.

This situation can easily trigger various financial risks.

If international short-sellers take the opportunity to act, it could cause significant turmoil in the financial market.

Of course, the dollar's interest rate hike cycle, which has lasted for more than two years, is about to end, and more dollar capital is coming in.

Whether for China's economy or for ordinary people, this is a good thing.

The biggest question now is whether the dollar will cut interest rates in September as many people hope.

This is a huge unknown.

We always believe that Americans cannot have good intentions; if they can avoid cutting interest rates, they will definitely grit their teeth and stick to it.

Even if they do cut interest rates, they will surely have other tactics to limit the large-scale inflow of capital into China.

Therefore, the dollar's interest rate cut does not mean that good times are coming immediately.

In the next period, we must both guard against risks and be prepared for a protracted battle.