ON JUNE 27TH, REFERENCE NEWS NETWORK REPORTED THAT THE WEBSITE OF HONG KONG'S SOUTH CHINA MORNING POST PUBLISHED AN ARTICLE TITLED "HOW A HAWKISH FEDERAL RESERVE CAN HELP CHINA CONTROL MARKET RISKS" ON JUNE 25TH. THE AUTHOR IS NICHOLAS SPIRO, A PARTNER AT LLOYDS CONSULTING IN THE UK. THE FULL TEXT IS EXCERPTED AS FOLLOWS:IN THE EYES OF DECISION-MAKERS IN DEVELOPING ECONOMIES, 'REDUCING PANIC' IS STILL URGENT. THE FEDERAL RESERVE HINTED IN MAY 2013 THAT IT WAS CONSIDERING REDUCING THE SIZE OF ITS QUANTITATIVE EASING PROGRAM, WHICH TRIGGERED A DISORDERLY SELL-OFF AND DEALT A HEAVY BLOW TO EMERGING MARKETS, ESPECIALLY THOSE HEAVILY RELIANT ON INCOMING FOREIGN CAPITAL.ON THE 16TH, THE FEDERAL RESERVE ADVANCED ITS EXPECTED START OF INTEREST RATE HIKES, WHICH SURPRISED FINANCIAL MARKETS AND GAVE DEVELOPING ECONOMIES AMPLE REASON TO WORRY ABOUT THE POSSIBILITY OF ANOTHER PANIC.THE FEDERAL RESERVE HAD PREVIOUSLY BEEN OPTIMISTIC ABOUT SOARING INFLATION, BUT THIS TIME IT SAID THAT THE PRESSURE BROUGHT BY PRICES COULD HAVE A MORE LASTING IMPACT, AND IT EXPECTS TO START RAISING INTEREST RATES IN 2023, ONE YEAR EARLIER THAN THE INITIAL FORECAST.GIVEN THE SIGNIFICANT HAWKISH BIAS OF THE FEDERAL RESERVE, THE MARKET'S RESPONSE HAS BEEN RELATIVELY MODERATE. HOWEVER, IN A CRITICAL AREA, THE IMPACT IS ENORMOUS. THE US DOLLAR HAS REBOUNDED SIGNIFICANTLY. SINCE THE OUTBREAK OF COVID-19, THE US DOLLAR HAS BEEN UNDER SERIOUS PRESSURE DUE TO THE SUPER DOVE STANCE OF THE FEDERAL RESERVE.THE US DOLLAR INDEX, WHICH MEASURES THE PERFORMANCE OF THE US DOLLAR RELATIVE TO A BASKET OF MAJOR CURRENCIES, ROSE 2.1% LAST WEEK, MARKING THE BEST WEEK IN OVER A YEAR AND ONE OF THE STRONGEST WEEKS IN THE PAST FIVE YEARS. IN A REPORT RELEASED ON THE 18TH, JPMORGAN CHASE BELIEVED THAT "THE FED'S UNEXPECTED SHIFT TOWARDS HAWKISHNESS THIS TIME HAS THE POTENTIAL TO BECOME A WATERSHED FOR THE US DOLLAR BULL MARKETIF THIS IS INDEED THE CASE, AND IF THE POLICY SHIFT IS AS SIGNIFICANT AS SOME INVESTORS CLAIM, THEN EMERGING MARKET ASSETS ARE BOUND TO FACE DIFFICULTIES. HOWEVER, A MORE HAWKISH FEDERAL RESERVE, ESPECIALLY A STRENGTHENING US DOLLAR, MAY BE FAVORABLE FOR CHINA.IN THE PAST FEW MONTHS, BEIJING HAS BEEN WORKING HARD TO MAINTAIN MARKET STABILITY. THIS IS PARTLY DUE TO THE SURGE IN SPECULATIVE FOREIGN INVESTMENT INFLOWS. THE DRIVING FACTORS BEHIND THIS ARE CHINA'S RAPID RECOVERY FROM THE COVID-19, CHINA'S HIGH RETURN RATE, AND CHINA'S RELATIVELY STABLE BOND MARKET.AT THE END OF LAST MONTH, THE EXCHANGE RATE OF THE CHINESE YUAN AGAINST THE US DOLLAR REACHED A THREE-YEAR HIGH. THIS MONTH, THE CHINESE YUAN DEPRECIATED BY 1.5% AGAINST THE US DOLLAR, AND THE BLOOMBERG COMMODITY INDEX HAS FALLEN BY 2.9% SINCE THE 10TH.AS THE FEDERAL RESERVE PREPARES TO WITHDRAW ITS STIMULUS PLAN, ALTHOUGH MANY OTHER EMERGING MARKET COUNTRIES ARE ALSO FACING PRESSURE TO RAISE INTEREST RATES AND ARE CONCERNED THAT CAPITAL OUTFLOWS WILL DISRUPT STABILITY, CHINA HAS BEGUN TO TIGHTEN ITS POLICIES AND IS MORE FOCUSED ON HOW TO RESPOND TO THE INFLUX OF FOREIGN CAPITAL.IT IS CURRENTLY UNCLEAR WHETHER THE FEDERAL RESERVE'S POLICY SHIFT IS AS TOUGH AS IT APPEARS ON THE SURFACE, WHICH RAISES DOUBTS ABOUT THE SUSTAINABILITY OF THE US DOLLAR REBOUND.IN THE PAST FEW DAYS, SEVERAL FEDERAL RESERVE DECISION-MAKERS, INCLUDING FEDERAL RESERVE CHAIRMAN JEROME POWELL, HAVE DOWNPLAYED THE THREAT POSED BY SOARING INFLATION AND INSISTED THAT THEY WILL PATIENTLY WAIT FOR INTEREST RATE HIKES.THIS NOT ONLY LEAVES THE IMPRESSION THAT THE CENTRAL BANK IS CONCERNED ABOUT THE POSSIBILITY OF ANOTHER PANIC, BUT ALSO INDICATES THAT THERE IS GROWING DISAGREEMENT WITHIN THE FEDERAL RESERVE REGARDING THE TIMING AND CONDITIONS FOR RAISING BORROWING COSTS. THE FEDERAL RESERVE, WHICH FIRMLY ADHERES TO THE HAWKISH LINE, MAY ALLEVIATE THE PRESSURE ON THE CHINESE MARKET TO SOME EXTENT. HOWEVER, A INDECISIVE FEDERAL RESERVE IS NOT BENEFICIAL TO ANYONE.