China urged don’t dismiss ‘negative impact’ of US interest rate hike out of hand

The US central bank last week signalled it is likely to raise interest rates in March, while also reaffirming its plans to end its bond purchases

Li Yang, a former vice-president of the Chinese Academy of Social Science, responded to a series of recent comments by people worried about the looming US policy changes

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The US Federal Reserve last week signalled it is likely to raise interest rates in March. Photo: Xinhua

Published: 11:30pm, 31 Jan 2022Updated: 9:43am, 2 Feb 2022

A change in monetary policy by the US Federal Reserve will have a “negative impact on the world”, including China, and should not be “dismissed”, according to a top Chinese researcher.

The US central bank last week signalled it is likely to raise interest rates in March, while also reaffirming its plans to end its bond purchases, before launching a significant cut in its asset holdings as it turns its attentions to tackling rising inflation.

“I think it’s best for everyone not to dismiss it lightly, especially not to make contemptuous comments on the US monetary authorities and their monetary policies,” said Li Yang, a former vice-president of the Chinese Academy of Social Sciences.

“It should be clearly recognised that, as the world’s largest professional monetary authority on the front line, the Federal Reserve is much more familiar with the situation in the United States than we are, and its experience is also much richer, and its theory is much more mature.”

The switch in tactics by the US Federal Reserve has already generated significant anxiety in China over the past few months, as it is also facing growing risks of an economic slowdown.

China exercises strict capital controls in planning its economy to manage the yuan’s exchange rate, its international balance sheet and the size of its foreign exchange reserves.

President Xi Jinping earlier this month called for countries to strengthen their economic policy coordination and prevent the world economy from falling again, urging central banks in the West not to hike interest rates too fast to fight inflation.