Fed’s coronavirus response under fire from China as Beijing seeks to go its own way
- China wants ‘greater autonomy’ of macroeconomic policies, signalling it is keen to add stimulus even if the US Federal Reserve starts tapering bond purchases
- China’s central bank is worried that unprecedented US stimulus will lead to a surge in US inflation in contrast to the US Federal Reserve’s benign view
As US Federal Reserve officials gear up for the Jackson Hole symposium, their response to the pandemic is being criticised as risky by counterparts in Beijing who are trying to decouple China’s monetary policy from the United States.
The Communist Party’s Politburo has pledged “greater autonomy” of macroeconomic policies, signalling a willingness to add stimulus as China’s recovery loses steam even if the US Federal Reserve starts tapering bond purchases.
China’s central bank, though, is far more worried that America’s unprecedented stimulus since the coronavirus pandemic will lead to a surge in US inflation in contrast to the US Federal Reserve’s benign view.
That flood of foreign money increases the interdependence of monetary policy in the world’s two largest economies, because it could reverse if investors decide they can get better returns in America.