US ‘must con­sider im­pact’ of wind­ing down QE pol­icy

China Daily (Hong Kong) - - BUSINESS - By ZHENG YANGPENG zhengyang­peng@ chi­nadaily.com.cn

The United States should con­sider the spillover ef­fect of its mone­tary pol­icy, es­pe­cially the tim­ing and pace of its exit from the ul­tra-loose mone­tary pol­icy known as quan­ti­ta­tive eas­ing, said a Chi­nese of­fi­cial ahead of the Group of 20 na­tions sum­mit sched­uled for Sept 5 to 6 in St. Peters­burg, Rus­sia.

Min­i­miz­ing the neg­a­tive im­pact on other na­tions as the US Fed­eral Re­serve “ta­pers off ” QE will be high on the agenda at the sum­mit, which will bring to­gether the lead­ers of de­vel­oped and de­vel­op­ing na­tions.

“The United States ... must con­sider the spillover ef­fect of its mone­tary pol­icy, es­pe­cially the tim­ing and rhythm of its withdrawal from the ul­tra-loose mone­tary pol­icy,” Vice- Min­is­ter of Fi­nance Zhu Guangyao said at a news con­fer­ence on Tues­day in Bei­jing.

How­ever, Yi Gang, a deputy gover­nor of the cen­tral bank, told the same brief­ing that an exit from QE may have only a “limited” ef­fect on China, com­pared with other emerg­ing economies.

“The im­pact on China is not that ob­vi­ous,” Yi said.

Ex­perts said the of­fi­cials’ com­ments un­der­scored China’s in­creas­ing con­cern about the un­cer­tainty posed by a pos­si­ble tight­en­ing of pre­vi­ously abun­dant liq­uid­ity.

Such con­cerns have al­ready hit some emerg­ing economies such as In­dia, In­done­sia and Brazil.

The min­utes from the lat­est Fed meet­ing in July strength­ened mar­ket ex­pec­ta­tions that it will re­duce its bond-buy­ing pro­gram in Septem­ber.

Ding Zhi­jie, dean of the School of Bank­ing and Fi­nance at the Univer­sity of In­ter­na­tional Busi­ness and Economics, said China has stronger fi­nan­cial “fire­walls” than other coun­tries such as In­dia, in­clud­ing cap­i­ta­lac­count con­trols.

How­ever, Ding said, the ac­tual dam­age to China caused by US poli­cies could be larger than for other emerg­ing economies.

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