US 10-Year Yield Breaks 5% and Fed Hikes; Fund Managers Say China Assets Still 'Follow Their Own Path'

Published Sep 21, 03:16 PM UTC

This article analyzes the recent surge in the U.S. 10-year Treasury yield above 5% and the Federal Reserve's 25 basis point rate hike on September 16, 2023, marking the first increase since July 2023. Multiple Chinese fund managers and economists, including Tang Xiaodong of Southern Fund and Li Zhan of China Merchants Fund, provide insights. They attribute the yield rise to a mix of cyclical factors (inflation, oil prices) and structural shifts, notably AI-driven capital expenditure competing for savings. The experts debate whether the yield increase is temporary or signals a new, higher equilibrium. They examine the changing transmission mechanism from U.S. rates to emerging markets, noting that China's strong exports and yuan internationalization have buffered capital outflows. For Chinese assets, the consensus is that domestic policy and economic cycles remain the primary drivers, though high U.S. rates pose risks to offshore financing and AI hardware exporters. The article specifically explores the dual impact on China's AI industry: potential demand from U.S. tech capex versus higher financing costs and pressure for self-reliance.

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