As the anticipated U.S. decision to put an end to the quantitative easing policy has sent jitters across the markets of emerging economies, and has led to mounting concern over a capital exodus, the Chinese government has geared up to do its own "homework" well before any impact hits the world's second-largest economy.
The "homework," as termed by President of Thomson Reuters' Global Growth & Operation Division Shanker Ramamurthy during an interview with China.org.cn, refers to a country's monetary and fiscal policies required to ensure a strong currency and a sustainable economy.
In September 2012, the U.S. Federal Reserve rolled out its plans for QE3, which came after an interval of 14 months following the end of QE2 and led to a monthly buying of US$85 billion worth of bonds on the markets.
Commenting on the impact of the end of QE3, Shanker said the effect of U.S. tapering would be limited for the emerging markets, as long as they do their "homework" first.
He is confident that Asian economies will not face a financial crisis similar to the one that hit the region in the late 1990s, because those countries, China in particular, are now in a stronger position to protect them from the impact.
He said China has the capability to offset the overspill effect brought on by the U.S. withdrawal, citing China's massive foreign reserves which stood at some 3.5 trillion yuan (US$574 billion) by the end of the first half year.
He mentioned that China's Premier Li Keqiang had delivered several encouraging and positive messages in his speech at the opening of the Summer Davos in Dalian last week, by pledging continued reforms and a sustainable economy.
"China has got a substantial trade surplus," said Shanker. "Premier Li and the Chinese government are taking very clear and appropriate steps to sustain its economy."
His confidence in China partly stems from China's ambitious urbanization plan which Premier Li has taken as the centerpiece of his policies over the next decade. In an article published in Qiushi, a bi-monthly magazine run by the Communist Party of China, Li said China's urbanization drive will translate into a consumption totaling at more than 100 billion yuan (US$15.9 billion) and correspondingly create more investment opportunities.
"We are seeing the greatest urbanization in the history of mankind happening in China, which really unleashes the consumer economy with substantial opportunities for the Chinese economy," said Shanker.
His confidence was reinforced by China's strong economic data released last week. China's factory output in August grew by 10.4 percent, hitting a 17-month high.
Shanker said Thomson Reuters will align their future plan with the Chinese government's policies, which he thought would take reform as a priority for the Chinese new leadership while maintaining a steady economic growth.
"We are very encouraged by the initiatives the government is taking. In China, we are making more investments and hiring more people to help the initiatives that the government has progressed with," he said.