MNI BRIEF: China On Watch For Sharp Fed Tightening: Advisors

China is watching for any "spillover effect" of a sharp turn in the Federal Reserve's policy settings in the emerging markets, two high-ranked government advisors told reporters in a briefing on Friday, as they called for closer policy coordination between China and the U.S.

The impact of the Fed’s policy tightening may lead to capital outflow, rising interest rates, depreciating currencies, falling assets prices and economic slowdown in emerging markets, said Li Yang, senior fellow of Chinese Academy of Social Sciences. China is in a comparatively good position, since the capital account is controlled and the yuan exchange rate is managed, he said.

The two global economic giants need to normalize policy communication in areas such as the economy, high-tech, investment, as the sides hadn't communicated well in 2021, said former Vice Minister of Finance Zhu Guangyao, when asked to evaluate the progress of the bilateral relationship in the first year of the Biden Administration. High tariffs damaged Sino-US economic relationship, and the two countries should increase talks to reduce the rising distrust, Zhu said.