US QE exit has limited impact on China

WASHINGTON - China is unlikely to feel any major impact once the US Federal Reserve shuts off the money faucet known as the quantitative easing (QE), said US columnist and CNN host Fareed Zakaria.

That's because the Fed is likely to ratchet down QE levels gradually as the US economy regains its strength after taking a nosedive more than five years ago. And that easy-does-it approach will ensure that China does not feel the sting, Zakaria told Xinhua in an exclusive interview.

"So far, we (the US) are still in an environment that is economically depressed, where growth is not where it could be, and so I believe the Federal Reserve will continue the (QE) policy," said Zakaria, who was named in 2010 by Foreign Policy magazine as one of the world's top 100 global thinkers.

"I don't expect any early end to QE, and I think that is as it should be because growth is not where it should be," he said.

The Fed indicated last month that its $85-billion-a-month bond-buying program could be "tapered" before year's end, but later Fed chief Ben Bernanke began backpedaling after investors became nervous.

Zakaria said that once the Fed does begin trimming QE, such a move "will be a sign the US economy is doing well."

Meanwhile, the Fed is keeping its eye fixed on US growth, which will also benefit China, he said.

"If the US economy is growing, that is good for China, and it's good for the world," he said, adding that continued US growth means the world's largest economy will continue to import Chinese goods.

"So what I believe the Federal Reserve will do, is to keep its eye very steadily on that question," Zakaria said.

"While it is certainly going to be a tricky process to taper down quantitative easing, I think that so far the Federal Reserve has pursued a very wise course, and I don't believe it will start tapering until there is significantly more robust growth in the United States," he said.

China should not fret over the US move on QE, as "China's interests are aligned very strongly in the same direction as the United States," he said.

"I think interest rates will naturally rise a little bit, but I don't think they will rise a huge amount because there is very little inflation in the Western world," Zakaria added.