Experts see mixed effect from EU QE

Plan will make imports cheaper, but will also pressurize yuan

Quantitative easing (QE) in Europe could be a double-edged sword for China, as it will boost imports from Europe and stimulate Chinese outbound investment, but could also put pressure on the Chinese currency, experts said Sunday.

The central parity rate of the yuan strengthened to 6.9795 against the euro on Friday, the biggest daily rise since November 2011, according to data from the People's Bank of China, the country's central bank.

The European Central Bank (ECB) decided on Thursday to start purchasing public and private securities in monthly amounts of 60 billion euros ($67 billion) from March 2015 until the end of September 2016, in a bid to address low inflation and revive growth.

Investors have become more confident about the US economy and its currency since the ECB announced its QE program, Li Jianjun, a financial analyst with Bank of China, told the Global Times Sunday.

The yuan, which is pegged to a basket of currencies, most notably the US dollar, also rose against the euro, Li noted.

But experts had mixed views on the impact of the ECB's move on China.

"A weaker euro will benefit Chinese importers but will hurt exporters. China can take advantage by importing more high-tech products from Europe, which would be in line with the country's industrial upgrading," Li said.

"It is also an opportunity for Chinese investors to increase investment in European assets," he noted.

A senior Chinese official said Friday that China's exporters will benefit from the ECB's QE program in the long term, as it could help the European economy to gradually recover.

The program will help boost the eurozone's economy, increase demand and potentially boost China's exports, because Europe is one of China's most important trading partners, Pan Gongsheng, deputy governor of China's central bank, told a press conference held Friday in Beijing.

Bilateral trade volume between China and the EU amounted to 3.78 trillion yuan ($610 billion) in 2014, up 8.9 percent from a year earlier, according to data from the General Administration of Customs.

However, Pan noted that the ECB's QE program, together with the US Federal Reserve's normalization of its monetary policy, will lead to a stronger US dollar, which might put pressure on the yuan.

He also warned that the ECB's new measures could lead to a capital flow into the US, posing new uncertainties for global cross-border capital flows.

Meanwhile, the fall in the euro was hailed by tourism agencies and buyers of luxury goods in China.

"It's the best time to buy European-made luxury items, as they are about 10 percent cheaper because of the euro's depreciation in recent months," a purchasing agent surnamed Li in Nice, a city in southern France, told the Global Times Sunday.

Tourism agencies also expect more Chinese customers to travel to European countries in the coming months.

"There has not been an immediate cut in package tour fees following the ECB's move, but the prices of trips to Europe in February and March are cheaper than they were last year because of the euro's depreciation against the yuan since mid-2014," Cao Ruzhen, sales manager at a China Travel Service branch in Beijing, told the Global Times Sunday.

According to Cao, one of the major reasons why Chinese tourists go to Europe is for shopping, and they can benefit from tax refund policies.

About 70 percent of luxury goods bought by Chinese people in 2014 were bought abroad, or through daigou, according to a report on China's luxury market released by Bain & Company on Tuesday.

Purchases by daigou, or overseas personal shoppers who buy and send luxury goods to customers in China, rose to a total value of 55 to 75 billion yuan in 2014, said the report.