The European Central Bank’s (ECB) quantitative easing (QE) measures could trigger “competitive depreciation” of currencies around the world, the Chinese Ministry of Commerce said yesterday.
The ECB last week unveiled a program to buy 60 billion euros (US$68 billion) of private and public bonds each month starting in March, a move intended to ward off deflation in the eurozone.
The figure was more than the 50 billion euros expected by analysts, and the unprecedented scheme is set to total more than 1 trillion euros.
“The European QE may worsen the competitive depreciation of currencies of various countries, further increasing the uncertainties in international cross-border capital flows,” Chinese Ministry of Commerce spokesman Shen Danyang (沈丹陽) said. “We will closely monitor that.”
While the measures would make European exports cheaper and might help boost market confidence and growth in the eurozone in the short term, their long-term effects remain uncertain, he added.
“It is still unclear whether in the mid-to-long-term, the QE can stop the eurozone economy from slipping into long-term stagnation and realize comprehensive recovery and growth,” he said.
The EU is China’s largest trading partner. It is Chian’s top source of imports and its second-largest export market.
Shen said the impact of the stimulus on bilateral trade would be “both good and bad.”
“The QE will push the euro to further depreciate, which is likely to lead Chinese companies expanding imports from Europe and lowering their investment costs in Europe,” he said. “Meanwhile, the weakening of the euro will affect Chinese companies’ exports to Europe and Chinese firms’ existing investment in Europe will also face the risks of suffering losses.”
According to Chinese data, two-way shipments increased 9.9 percent year-on-year to US$615.1 billion last year, with China enjoying a surplus of US$126.6 billion.
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