PBOC’s Zhou Urges Fed to Consider Global Effect of Policy Easing

China’s central bank Governor Zhou Xiaochuan said the U.S. Federal Reserve has a responsibility to consider the global effects of its actions after emerging-market economies suffered from capital inflows.

Because the U.S. dollar is the world’s main reserve currency, the Fed “may have more responsibility not only to consider the U.S. economy but also the global economy,” Zhou said today during a panel discussion at the Boao Forum for Asia on the southern Chinese island of Hainan.

Zhou’s comments reprise criticism of the U.S. from emerging nations who complained that so-called quantitative easing was sending unwanted cash into their economies, adding to inflation risks. Fed Chairman Ben S. Bernanke said last week the central bank will consider further stimulus, even after upgrading its economic outlook March 13.

For China and some other emerging economies, the policy goal is to “gradually bring inflation down” to help achieve a so-called soft landing, and China is using interest rates combined with additional tools to achieve that, Zhou said. He declined to comment when asked if the central bank is planning any adjustments to monetary policy.

Expanding domestic demand and reducing the trade surplus have also been part of China’s strategic plan since the global financial crisis, Zhou said today.

Premier Wen Jiabao has pledged to “fine-tune” economic policies as needed as weakness in export demand and a cooling housing market restrain an economy that probably grew at the slowest pace in almost three years in the first quarter. Analysts in a Bloomberg News survey last week unanimously said that banks’ reserve requirements will fall this year, while nine of 20 predicted lower benchmark borrowing costs.

To contact Bloomberg News staff for this story: Scott Lanman in Beijing at slanman@bloomberg.net; Huiwen Yang in Shanghai at hyang66@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Zhou Xiaochuan, governor of the People's Bank of China. Photographer: Nelson Ching/Bloomberg