News / Asia

Ahead of G20, China Urges Caution in Fed Policy Tapering

China's Vice Finance Minister Zhu Guangyao (file photo)
China's Vice Finance Minister Zhu Guangyao (file photo)
Reuters
The U.S. Federal Reserve must consider when and how fast it unwinds its economic stimulus to avoid harming emerging markets, although the impact on China could be more limited compared with some other countries, senior Chinese officials said on Tuesday.

The warning by China's Vice Finance Minister Zhu Guangyao and central bank Vice Governor Yi Gang came as economies from Brazil to Indonesia struggle to cope with capital flight as U.S. interest rates rise ahead of an expected tapering off in the Fed's bond buying program that unleashed liquidity across the world.

“The U.S. economy is showing some positive signs and is recovering gradually and we welcome this,” Zhu told a briefing ahead of G20 leaders' summit in Russia next week.

“But the United States - the main currency issuing country - must consider the spill-over effect of its monetary policy, especially the opportunity and rhythm of its exit from the ultra-loose monetary policy,” Zhu said.

Apart from being a leading emerging market, China has a major stake in the direction of Fed policy as one of the biggest creditors to the United States. A substantial portion of its foreign exchange reserves - the world's biggest by far at some $3.5 trillion - are invested in U.S. government, agency and corporate debt.

Financial markets are fretting that the U.S. Fed might decide to reduce its monthly bond buying when it meets on Sept 17 and 18. Fed Chairman Ben Bernanke said in June the bond buying program could be halted by the middle of 2014.

The prospects of the Fed reining in its stimulus comes as China's economic growth slows down to its weakest pace in two decades, partly as the government tries to reduce its reliance on exports in favor of domestic consumption.

Zhu said China faced a severe economic environment at home and abroad, but it would keep economic policies stable.

China will refrain from providing fresh stimulus and he predicted the economy was on track to grow around 7.5 percent this year - in line with the government's target.

The government will instead quicken structural adjustments, including efforts to reduce with factory overcapacity, he said.

Speaking at the briefing ahead of the G20 meeting in St Petersburg on Sept 5 and 6, Vice Governor Yi Gang said how nations might cope as developed economies tighten monetary policy will be a focus of the G20 meeting.

“On monetary policy, the focal point [of G20] will be on how to minimize the external impact when major developed countries exit or gradually exit quantitative easing, especially causing volatile capital flows in emerging markets and putting pressures on emerging-market currencies,” Yi said.

“The impact on China will not be obvious compared to other emerging economies - the yuan will be stable and monetary policy will be stable,” he said.

Analysts said Yi was probably referring to China's capital controls and its foreign currency reserves, which provide cushions against economic shocks.

“Not only China has capital controls, it also has piles of FX reserves and current account surplus, these are the advantages for China to weather the Fed tapering,” said Minggao Shen, China economist at Citigroup in Hong Kong.

China keeps a tight grip on capital account transactions, but there are many loopholes, especially through trade flows, analysts say. So China's economy could face some pressure from capital outflows, they say.

A $100 billion foreign-currency fund being discussed by countries that make up the BRICS grouping of Brazil, Russia, India, China and South Africa will be set up in the foreseeable future, Yi said, adding that China would provide “a big share” of the funds but he did not give details.

“It will not exceed 50 percent,” he said.

The BRICS' leaders have agreed to set up the fund to help ward off currency crises. It is expected to be formally launched at a BRICS summit in Brazil next year.

You May Like

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More