7 biggest reasons why China could be immune to QE tapering

There'll be little impact, says analyst.

According to the Bank of America Merrill Lynch, after the US Federal Reserve hinted in May that it will soon start to scale back the US$85bn-a-month asset purchase program, several emerging economies have already fallen into turmoil with slumping asset prices and falling currencies.

BofAML noted that China isn't likely to be the next in domino.

"Actually we believe it's time for markets to revisit some of China's strength while not forgetting many of China's problems."

BofAML highlighted 7 reasons to support this.

Here's more:

Why can China be immune to QE tapering?

China will surely be affected by the incoming QE tapering, but we believe the QE tapering will have little material impact on China's growth, currency valuation and financial stability.

We believe a number of key attributes will make China be largely immune to the QE tapering: (1) Sustained current account surplus; (2) Low foreign debt; (3) Huge foreign exchange reserves;

(4) High savings, high investment and high capacity in manufacturing; (5) Capital control; (6) A large economy with limited dependence on exports; (7) A government which does not need to ramp up subsidies to maintain its ruling.

For emerging markets, though building sound financial institutions is still important, macro policies to control external debt, to build FX reserves and to limit current account deficit should still be highly valued.

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