This requires countries to find a way to make good use of liquidity from overseas while maintaining healthy development of the financial system.

Inflation

On the other hand, the pressure on the appreciation of local currencies may bring shocks to export-oriented enterprises and the industrial restructuring of emerging markets.

As China's economic growth mode has long been highly dependent on exports, adjustments within a short time can be difficult.

China is likely to face greater pressure on the appreciation of its local currency.

Thus, this poses an urgent problem for China to ensure the soft landing of its industrial restructuring and the profits of export-oriented departments.

Last but not least, the US' expansionary monetary policy adds to the risk of stagflation - an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time.

Countries all over the world will have to loosen their monetary policies - by further reducing interest rates, for example - to avoid the possible negative effects that the US' monetary policies may bring them.

Such senseless competition of expansionary monetary policies may quicken the pace of inflation and delay the recovery of the world's economy.

(Shanghai Daily March 26, 2009)