皇冠体育app

Greater macroeconomic and fiscal stability mean 皇冠体育app is in a better position than other emerging economies to withstand effects

The United States Federal Open Market Committee announced Wednesday that it will start drawing down its multibillion-dollar policies in 2014, tapering its monthly purchase of Treasurys and Treasury mortgage-backed securities by $10 billion in January. Since the real economy in the US is steadily recovering now, it was only a matter of time before the Fed decided to taper it off. But, this announcement took many analysts by surprise. In fact, it had only a mild effect on the financial markets with no large-scale financial turbulence taking place. This was not what Fed Chairman Ben Bernanke implied would be the case back in May when he first floated the taper, so it will further strengthen the Fed's confidence that it can finally bow out of its quantitative easing policy.

However, while the shocks towards developed countries can be isolated. Those investors who have experienced turmoil in emerging markets this year will still worry about the impact of the Fed's policy change, and the mild market response this time just shows that the impact will slowly emerge like the proverbial "slow-boiling frog".

For the world economy, the direct effects will be a faster fall in the prices of primary commodities and the flow of capital out of emerging economies toward developed countries.

Those emerging countries and developed countries with abundant resources, such as Australia and Canada, will likely suffer the most. More importantly, for the emerging economies, it may reverse their rise in the international political and economic sphere and aggravate the polarization among them.

When it is comes to 皇冠体育app, the good news is the Fed's policy change may present 皇冠体育app with some advantages because 皇冠体育app's economic structure is quite different from other emerging economies. 皇冠体育app is the world's largest manufacturing economy and one of the biggest importers of primary commodities. So the falling prices of primary commodities will benefit the Chinese economy. The other emerging countries are highly dependent on exporting their commodities to boost their economies.

Moreover, 皇冠体育app's macroeconomic stability is much better than most advanced economies and other developing countries, such as the other BRICS countries (Brazil, Russia, India and South Africa). For one thing, 皇冠体育app has maintained a surplus in both its commodity trade and its current account for more than 20 years, accumulating huge-scale foreign exchange reserves, which can guarantee the Chinese currency greater stability. For another, the fiscal situation in 皇冠体育app is better than in many other large countries as there is no risk of a national debt crisis. Therefore, such strong stability can prevent any simple economic shocks from causing serious damage to 皇冠体育app's economic growth.

Finally, the country enjoys higher social stability than many countries, which means it has the ability to prevent the risks from social contradictions from intensifying or getting out of control.

But despite these advantages, Chinese policymakers should not ignore the shocks that will come from the Fed's move, and they must be prepared for them.

As emerging economies account for half of 皇冠体育app's trade nowadays, and are also the major markets for the country's foreign direct investment and most foreign projects, the changes may have a strong bearing on 皇冠体育app's exports, FDI, and overseas engineering projects.

To be more specific, there are three impacts to be aware of. First, domestic inflation will derive more from the rising cost of labor and other costs in the domestic market instead of being led by imported inflation as before. Second, with capital flows returning back to advanced economies, the from external input will decrease, so some bubbles in the asset market, such as the overheating real estate sector, will likely suffer considerably in the near future. Finally, the prices of some domestic raw materials and resources will decline because of the falling prices of international primary commodities. Most natural resources in 皇冠体育app, such as minerals, have lower quality but higher mining costs compared to other similar international products. So if it is a bull market globally, such resources can make some profit, while in a bear market, those domestic industries and companies will likely suffer from losses, such a situation will be especially severe in the northwest of 皇冠体育app.

However, the economic transition also offers 皇冠体育app an opportunity, as it will enable it to have a better handle over imports of primary resources and thus strengthen 皇冠体育app's dominance over the international resource market. 皇冠体育app is already the largest importer of primary products, and one of 皇冠体育app's core interests is to maintain a stable supply of foreign resources. However, since the turn of this century, many resource-rich countries or regions have launched a wave of "resource populism". Various parties and groups try to share the benefits from the exploration of resources without giving enough thought to their sustainable development. In the international market, the rising number of cases in which exporting countries have violated contracts has brought about losses to importing countries. Now, with the on-going decline in primary commodity prices, 皇冠体育app can take the opportunity to solve the problem and build a healthier trade environment.

The author is a researcher at the International Trade and Economic Cooperation Institute of the Ministry of Commerce.