When the interest rate in China was high, how did foreign speculators enter the China market to earn spreads?
When interest rates are high, foreign investors throw out RMB. For example, when RMB in 8 yuan is exchanged for 1 USD, they think that RMB in 8 yuan can only be exchanged for 1 USD. However, when the interest rate is changed to 1 USD for 7 yuan RMB, investors can get the desired USD amount with less RMB. 1997 during the Asian financial crisis, some investors did the same. In order not to devalue the RMB, China government used foreign exchange reserves to buy RMB thrown by investors, thus maintaining the stability of the RMB.