Analysis of the Impact of US Quantitative Easing Policy on China's Macro Economy

Abstract

The 2008 financial crisis caused many large enterprises to go bankrupt. In order to revitalize the crumbling economy and inject liquidity into the financial markets, US has carried out four rounds of QE policy. Since the COVID-19, America has resorted to unlimited quantitative easing in hopes of saving economy. The United States' QE has an impact on China's economic development due to their frequent economic interactions, and this impact will unavoidably spread as a result of QE's spillover effects. This research examines the Fed's QE monetary policy influence on Asian's biggest country economy in two time period, after the 2008 financial crisis and during the new coronavirus pandemic, in depth using current theories. In this study, the content of the QE monetary policy in the American continent is introduced, the implementation backdrop and impact of the policy are examined. The main focus of this paper is to present the impact of US QE monetary policy on China’s economy. First of all, US policy impact will inevitably spread to China's monetary policy and exchange rate policy. Secondly, the QE’s spillover effect of Chinese inflation is analyzed from RMB appreciation and commodity price rise. Third, the capital market's strong liquidity will lead to the inflow of international capital into our country due to the United States' QE monetary policy, so the impact on our capital market is analyzed. Fourthly, it analyzes the impact of dollar depreciation brought about by QE on the China's foreign exchange assets safety.