Global Or Competitive Monetary Easing

The euro area faces enormous economic difficulties, which makes the ECB have to introduce quantitative easing policy.

First, the European economy as a whole has been on the edge of deflation in the past two years. In December 2014, the euro area inflation rate dropped to -0.2%; two, the European economy was facing serious unemployment challenges, especially the unemployment of young people.

By the end of September 2014, the average unemployment rate in the euro area reached 11%, of which the unemployment rates in Macedonia, Greece and Spain were as high as 27.9%, 25.6% and 23.7% respectively. Three, the policy efficiency of the European authorities' economic recovery was getting weaker and weaker.

In 2012, the ECB's long-term refinancing scheme failed to promote the credit expansion of the private sector. The top two rounds of long-term refinancing schemes still have a shortfall of nearly 90 billion euros from the ceiling.

In June 2014, the euro zone entered the era of negative interest rates, and did not increase the investment and consumption behavior of European private sector.

Political issues are the catalyst of the European Central Bank's eventual move towards quantitative easing policy framework.

In the May 2014 European parliamentary election, political parties that were seriously dissatisfied with fiscal consolidation had made historic progress.

Nearly 20% of the 751 European parliamentary seats were controlled by them, and only 50 seats were held in the last European Parliament seat.

The eurozone is likely to face a new risk of fragmentation.

The ultra leftist coalition, which advocates resistance, oppose austerity and support the breakaway of the euro zone, has been dogged by three rounds of general elections in the ruling party and won the fourth round of January 25th elections.

The impact of political issues on European Union is also the basis for Germany to abandon its stance against quantitative easing.

In January 15, 2015, when the European Court ruled that the European Central Bank's quantitative easing policy was in line with EU law, the German Constitutional Court abandoned the argument and did not oppose the involvement of the Bundesbank in the plan.

As one of the world's largest economies, the euro zone quantitative easing policy will have a substantial impact on the euro area, the European Union and the global economy, especially in the global economic structure, capital flows, exchange rate changes, trade and investment, and commodity markets.

From a static point of view, quantitative easing in Europe is beneficial to the European economy and the global economy.

Quantitative easing policy can make market expectations turn positive, and boost business investment and employment growth. Theoretically, more capital will enter the real economy and gradually get rid of deflation, so as to raise the level of aggregate demand in Europe and the whole world.

However, from a dynamic perspective, because the Fed will gradually withdraw from quantitative easing policy and become more independent, European quantitative easing and its potential depreciation of the euro may make capital flow back to the us further, weakening the capital, technology and industrial base of European economic recovery.

On the global impact, quantitative easing in Europe will have a significant impact on the global economic structure, making new uncertainties in the global economic and monetary systems and financial markets.

After Japan, the United States and Britain, the euro area began to implement quantitative easing, making loose monetary policy the policy choice of the major economies, which may lead to a broader global "beggar thy neighbour" policy "stampede".

What is more certain is that the US dollar may continue to be strong and the US dollar will continue to strengthen in the medium term.

This is undoubtedly a significant impact on emerging economies including China.

The weakness of commodities will be trend, and European quantitative easing can not change this trend.

First, quantitative easing may make global liquidity more lax, but it can not expect liquidity effects similar to the Fed's quantitative easing policy.

Second, in the medium term,

It will be stable and strong, and the commodity market will not be strong enough.

Third, there is no fundamental basis for a substantial rise in commodity markets.

From the perspective of demand, the global economic recovery is not enough, limiting the total demand of commodities.

From the perspective of supply, the market price adjustment mechanism with OPEC as the core is weakening.

Under the condition of sharp shrinkage, the attention of Member States gradually shifted from price to share, thus expanding supply continuously, and the weakness of commodity market is a kind of supply shock.

As the two most important economies in the global economy, the interaction between Europe and China has deepened. The impact of changes in the European policy framework on China has also been far-reaching.

China's economy will face greater external uncertainty, and China should effectively guard against it.

First, we should dynamically assess the changes in macroeconomic policies in Europe and the United States and other economies and their impact on China's economy, and make corresponding plans to prevent major risks such as trade, finance and currency.

Two, on the basis of maintaining the overall stability of macroeconomic policies, we should give full play to the initiative of macroeconomic policies and make fine adjustments in order to ensure steady economic development and prevent major risks of stall.

Three, we should focus on the economic field and its external vulnerability that may lead to systemic risks, and guard against the greater impact of overcapacity, real estate bubble, shadow banking, local debt and capital flows and other risks and external risks.

Four, we should focus on the investment and risk prevention and control of commodity markets, and build up a new strategy for resource and energy security by taking advantage of the historical opportunities of weak global recovery and weakening commodity markets.

Five, we should turn external pressure into internal reform motive force, comprehensively deepen reform, give full play to the decisive role of the market in resource allocation, speed up the reform of exchange rate and interest rate system, and accelerate the adjustment of economic structure and the pformation of development mode.