The paper "Capital Inflows and Outflows in Thailand and China" is an outstanding example of a micro and macroeconomic assignment. The concern of China is because QE has positive impacts on the economy of the U. S. and negative impacts on other impacts. Given that China is related to the U. S. significantly, it is concerned with the issue since, there is a high probability the exchange rates of the country will decrease, increase the inflation rate and increasing interest rates. The diagram below presents the impact of capital inflows to China through QE on inflation, exchange rates and interest rates. The QE increases inflation rates in other countries including China.
Therefore, as the inflation level increases the employment levels increase. The QE leads to a decline in U. S. exports and an increase in imports. The Americans will be acquiring yields from China at lower prices and significantly low interest rates than those set by the Fed. Thus, this is a clear identification that the QE is beneficial for the U. S. and it disadvantages China. The quantitative easing policy's main motive is to simplify the acclaim conditions in the global market.
The U. S dollar is perceived as the international coinage, where its policies influence other factors such as the interest rates and world production of other markets. In China, the QE started in 2008, which increased the CPI inflation rates to a peak of 7% (Ruan, 10). Thus, the dismay expressed by the Chinese was due to the concern on the impact the U. S. QE policy would trigger to its country. It had already occurred in 2008 causing a high inflation rate, which was a negative shock for the economy.
Thus, given it had already appeared to increase the inflation rate of the country, it was a key cause for concern. The QE model is a financial tool used to enhance markets such as the US economy. However, the boost it provides the US is not experienced in other countries. That is; to other currencies, it conveys spillovers in their economies. The Chinese dismay is related to the probable upsurge in the prices of supplies, which would also lead to an upsurge in the production costs in China leading to a development in the inflation proportion of imports (China Daily).
As the undervalued curve of the Chinese currency demonstrates, the imports from China decrease while exports from the U. S increase. The QE decreases the value of the Yuan, which benefits the U. S. as they acquire products at low prices.
China Daily. "US Urged t Consider Effects of Policies." International Business Times (2012): 1-1. http://www.ibtimes.com/exnet/chinese-reaction-fed-qe3-not-happy-797141.
Grenville, Stephen. "Central Banks and Capital Outflows." Working Papers in International Economics (2008): 1-40. https://www.ciaonet.org/attachments/385/uploads.
Ho, Yudith. "Baht Falls a Second Week as Thai Stocks Drop on Political Unrest." Bloomberg: The Year Ahead (2013): 1-1. http://www.bloomberg.com/news/articles/2013-12-27/baht-falls-a-second-week-on-concern-protests-to-spur-outflows.
Ocampo, Antonio, Jose and Jaime Ros. The Oxford Handbook of Latin American Economics. New York: OUP Oxford, 2011.
Ruan, Hadong. "Impact of U.S. Quantitative Easing Policy on Chinese Inflation - a vector autoregression analysis based on QE1 AND QE2." Social Sciences (2013): 1-31. https://www.uvic.ca/socialsciences/economics/assets/docs/honours/Ruan_Ryan.pdf.