Nation must adjust when US tapers QE

Updated: 2013-08-27 06:50

(China Daily)

  Print Mail Large Medium  Small 0

China needs to prepare for the moment when the United States begins to wind back its quantitative easing policy, said National Bureau of Statistics spokesman Sheng Laiyun on Monday.

"As China's economy is still highly dependent on external markets, policy changes in the US inevitably influence China," he said.

The government spokesman called on the US Federal Reserve to consider the economic situations of both the world and of emerging markets before it makes a decision.

"In fact, the previous quantitative easing policy depreciated the dollar, lifted up prices of commodities in the global market and imported inflation pressure on emerging markets," Sheng said.

Economists expect US GDP to grow by 2.2 percent between April and June, up from an initial estimate of 1.7 percent, as a result of higher net exports. They said that any upward revision to US second-quarter GDP growth will give the Fed more confidence to taper its QE policy.

A Barclays Capital report said that the Fed's relaxing of the policy will have indirect but slight impact on capital flows to China.

"We think large, sustained outflows are unlikely. China is less vulnerable to significant outflows, relative to other emerging markets, due to its relatively closed capital account," said Chang Jian, Barclays Capital chief economist in China.

"The dominant entities affecting volatility of capital flows and currency demand are large domestic corporations with foreign exchange exposure from trade receipts, rather than global investors who still need to operate through the Qualified Foreign Institutional Investors schemes."

8.03K