Over the past five years, U.S. monetary policy has shifted significantly from tightening to easing, profoundly impacting the global economic environment and trade dynamics of various countries. Since 2018, the Federal Reserve has implemented a series of interest rate hikes to address economic growth and rising inflation in the United States. These rate hikes made the U.S. dollar more attractive, causing a large inflow of international capital into the United States, which increased global capital costs and imposed substantial pressure on many emerging market economies and companies. For China's foreign trade industry, a high-interest rate environment has meant higher export costs and reduced demand. However, with market expectations that the Federal Reserve may decide to cut interest rates at its meeting in September this year, this policy adjustment could have several positive impacts on China's foreign trade industry, particularly for export-oriented companies like ours that specialize in producing electrical wire steel pipes, flexible conduits, and their fittings.

1. Exchange Rates and Export Competitiveness

A Federal Reserve interest rate cut typically leads to a weaker U.S. dollar, which may cause the Chinese yuan to appreciate. For our company, while a stronger yuan might somewhat impact export price competitiveness, a weaker dollar generally boosts global demand, especially in our major export markets—Central and South America, the Middle East, and Southeast Asia. Customers in these regions are more inclined to import our products when the dollar weakens.

Our products, such as electrical wire steel pipes, flexible conduits, and their fittings, are well-regarded in international markets for their quality and durability. As the dollar weakens, these markets may see a significant increase in demand for our products because they become more attractive when priced in local currencies. This shift will help us increase market share and sales.

2. Potential Growth in Foreign Trade Orders

The Federal Reserve's interest rate cut policy can help alleviate global economic uncertainty and stabilize market expectations. This policy environment is conducive to global economic recovery, especially in our major export markets—Central and South America, the Middle East, and Southeast Asia. The economic recovery in these markets will directly drive the rebound of foreign trade orders. For our company, this means more export opportunities, particularly in sectors like construction and electrical infrastructure, where the demand for our electrical wire steel pipes and flexible conduits is likely to increase significantly.

As the global economic environment improves and trade conditions loosen, we also have the opportunity to further expand our market presence in these regions. This potential market growth will further consolidate our position in international markets and drive sustained company growth.

3. Capital Liquidity and Financing Environment

In a high-interest rate environment, global capital flows heavily into the United States, putting pressure on emerging market countries due to capital outflows. After the Federal Reserve cuts interest rates, the interest rate differential between the U.S. and other economies may narrow, potentially reducing the phenomenon of capital returning to the U.S. This will help stabilize China's capital market and improve the overall financial environment.

Although our company does not rely on external capital and all raw materials are sourced from China, a more stable global financial environment will help us maintain supply chain stability and smooth production operations. Moreover, if the financing environment further improves, it provides us with more options and flexibility for expanding production capacity and market share in the future.

4. Positive Impact on the External Trade Environment

A Federal Reserve rate cut could also indirectly impact global trade tensions. Rate cuts typically stimulate the U.S. economy, which helps ease global trade tensions. In this context, our company can better navigate potential market fluctuations and policy changes, further optimizing our market strategies and product portfolio to adapt to changes in the global economic landscape.

Additionally, as the trade environment improves, we have the opportunity to deepen cooperation with existing customers and attract more new customers, helping us achieve more stable growth and a higher market share.

5. Conclusion

Overall, if the Federal Reserve decides to cut interest rates in September, it will bring several positive impacts to China's foreign trade industry, especially for export-oriented companies like ours that specialize in producing electrical wire steel pipes, flexible conduits, and their fittings. We will continue to monitor changes in the global economic environment, remain vigilant, and develop flexible strategies to ensure a favorable position in future market competition. Facing the ever-changing international market environment, we will continuously improve product quality and innovate business models to maintain competitiveness and sustained growth in the complex and dynamic global market.

8.24.2024