China: We Will Survive American Monetary Policy Spillover
The chief of the Central Bank of China, Zhou Xiaochuan, expressed confidence that his country could weather the storm if the United States decides to taper quantitative easing, Reuters reports.
“In the face of a possible shock, China will ensure vitality and resilience of the micro-economy and maintain flexible policies,” Zhou said, according to China’s Xinhua news agency. However, he expressed some concern that “China cannot be immune if there is sharp volatility in the global financial markets,” echoing sentiments about the risk of spillover effects even if China’s currency is not directly affected.
Zhou’s fears seem to be reflective of recent actions taken in the wake of dropping currency values in countries such as Brazil and India. Chinese banking officials have made calls for strengthened financial ties between emerging countries, which have included currency swaps and informal agreements. However, the biggest move on that front has been the establishment of a $100 billion fund to steady emerging currency markets, negotiated by BRIC nations during the Group of 20 summit currently taking place in St. Petersburg, Russia.