A Research On The Effects Of The U.S. Quantitative Easing Policy On China's Economy

The Quantitative Easing Policy (QEP) is firstly practiced by the Bank of Japan in March 19th 2001, and after that day, the QEP became a reality from merely a theory. And after the global financial crisis in September 2008, faced with the constraints of Zero Interest Rate Policy and the inefficiency of the traditional easing monetary policy, the United States of America implemented two rounds of QEP to stimulate the economy, and many other western economies also followed. And the most important task of China, which has close economic ties with the United States of America and also faced economic slowdown after global financial crisis, is to carefully analyze the adverse effects of the U.S. QEP on China's economy and actively implement the relevant policies and measures to cope with those adverse effects in order to ensure steady economic recovery and growth of China's economy.The outline of this paper shows as follow:this paper firstly tries to conduct a systematic research on both theory and U.S. practice of the QEP from the perspective of the theory analysis and practice analysis, then this paper analyzes the potential adverse effects of the U.S. QEP on China's economy from specific angles, finally, this paper proposes some related policy advice. The first section is the introduction. In the second section, this paper outlines the definition of the QEP and its theoretical roots, then details the four ways it operates and its six mechanisms, and finally seriously analyzes the differences between it and the traditional easing monetary policy. Based on the theoretical analysis of the second section, the third section focuses on the QEP implemented by the Federal Reserve, including its implementation situation, implementation measures and three categories of policy tools. And then based on the theory and practice of QEP, also through three aspects of economic development, foreign exchange reserves and the monetary policy, the fourth section focuses the effects of the U.S. QEP on China's economy, and concludes that the U.S. QEP will not be conducive to China's overall economic recovery and the safety of China's foreign exchange reserves and will also increase the operation difficult of controlling inflation and China's monetary policy. Faced with those potential adverse effects, the last section proposes six policy responses respectively, including inflation control, the protection of foreign trade, the focus on economic and policy trends of the U.S., strengthening the security management of foreign exchanges reserves, working against the international hot money inflow and promoting the ultimate reform of RMB exchange rate mechanism, to reduce those adverse effects and make sure the long development of China's economy.