China urged to ease economic policy, cut exposure to US assets ahead of impending Fed rate hike
- Prominent Chinese economist Yu Yongding says China must ‘prepare in advance’ for a US rate hike or face consequences
- A US rate hike could strengthen the value of the US dollar against the yuan and trigger a fund outflow from China
China should waste no time in diversifying from US dollar assets and easing its economic policy, according to analysts, as the world’s second largest economy is increasingly wary of its vulnerability to changes in US monetary policy.
Yu Yongding, a prominent Chinese economist and former central bank adviser, said it was regretful that China’s own monetary policy is facing constraints as a result of monetary shifts in the United States and Europe.
“If the US Federal Reserve raises rates, there are many measures available but it’s more difficult [to implement] in this environment and the costs will be high,” Yu said at a virtual seminar organised by Renmin University of China on Thursday.
We need to prepare in advance. It’s difficult to predict when it will become a problem, but it may happen
“I regret to say that there are certain things we could have done earlier … If we continue to delay it, it will just get more difficult.
“China’s monetary policy should support an expansion of fiscal policy to steady the economic growth.
“We are competing with the US, from a geopolitical perspective, US’ [gross domestic product] growth may overtake China’s this year – this is a big problem that we should pay attention to.”