China Says Fed Easing May Flood World Economy With ‘Hot Money’

Chinese Vice Finance Minister Zhu Guangyao said the U.S. Federal Reserve’s decision to pump $600 billion into the economy might “shock” emerging markets by flooding them with capital.

The first round of quantitative easing, as the Fed policy is termed, in 2009 was justified because the global economy lacked liquidity, Zhu told reporters in Beijing today. With a recovery now under way, new purchases of Treasuries to inject funds into the financial system may be destabilizing, he said.