China circumspect on Eurozone’s quantitative easing
January 30, 2015, 6:11 am

A €1.1 trillion quantitative easing program was announced last week by the European Central Bank’s president, Mario Draghi (right) [Xinhua]

A Chinese official said Thursday that the European version of QE is set to impose a “spillover effect,” positive and negative, on China-Europe economic and trade relations.

China’s Ministry of Commerce (MOC) spokesman Shen Danyang at a press conference days after the European Central Bank unveiled a program last week to buy 60 billion euros (about $68 billion) of private and public bonds each month from March to ward off deflation in the eurozone.

While a depreciating euro could help increase Chinese companies’ import from Europe and reduce the cost of investing in Europe, it is not good for Chinese exports, with existing investment already made by Chinese firms facing risk of loss, Shen told reporters in Beijing.

For the European economy, Shen said, the QE’s impact could be two-sided as well.

The move could cut eurozone countries’ cost of financing, boost export and create favorable conditions for growth. However, from a medium-to-long-term perspective, it is still unclear whether the QE move could stop eurozone economy from falling into long-standing recession, he said.

Shen also expects “competitive depreciation” among currencies of various countries to intensify and the uncertainty about global cross-border capital flow to grow as a result of the QE.

“We will closely monitor that,” Shen told the press conference.

Trade of goods between China and the EU reached $615.1 billion in 2014, up 9.9 per cent from 2013, official data showed.

EU is China’s largest trade partner, the largest source of import and the second largest export market.

Source: Agencies