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

    Taj Mahal Battles New Threat from Insects

    Swarms of insects are proliferating in the heavily contaminated waters of the Yamuna River, which flows behind the 17th century monument

    Self-doubt, Cultural Barriers Hinder Cambodian Women in Tech

    Longtime Cambodian tech observer Sok Sikieng says that although more women have joined profession in recent years, there remain significant factors hindering women from reaching tech potential

    Trans-Adriatic Pipeline to Boost European Energy Security

    $4.5 billion-pipeline will become operational in 2020 and will deliver gas from Azerbaijan’s Shah Deniz II field to southern Italy

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora