EU quantitative easing policy will have a limited impact on China

 The European Central Bank decided on Jan. 22, 2015 to start a large scale quantitative easing program. From March this year, the ECB and national central banks in the euro zone will purchase 60 billion euros worth of bonds and securities from euro zone governments, agencies and European institutions each month. The program will last at least until the end of September 2016.

The ECB unveiled the quantitative easing policy to give an impetus to the sluggish European economy. For Europe, it has been a long road out of woods, but the journey is far from its end. Unlike the US and China, Europe has not issued active fiscal policies. The EU has to engage in this program of quantitative easing to stimulate its moribund economy.

The policy will last 18 months, giving the market time to adapt; the main currency of settlement remains the US dollar, so the impact of euro easing is limited, said Xu Mingqi, researcher of Word Economy Research Institute of Shanghai Academy of Science.

He also pointed out that quantitative easing is unlikely to cause a significant fall because the Euro has already plummeted recently. Meanwhile, China has changed its economic structure to build up its ability to withstand risk. The EU is China’s largest trade partner, so the euro depression is likely to have a negative impact on China’s exports to European countries. But Xu also added that a weak euro will reduce the cost of China’s imports from European countries.

http://en.people.cn/n/2015/0127/c90000-8841897.html