A Study on the Impact of Developed Countries' Monetary Policies on China's Foreign Trade

Wenxiao Gao

GBP Proceedings Series, 2025, vol. 14, 110-116

Abstract: The spillover effects of monetary policy decisions by developed countries can exert significant risk implications for global economic growth and financial stability. As issuers of the world's most influential reserve currencies, shifts in the monetary policies of countries such as the United States and members of the Eurozone can reverberate across multiple channels, directly shaping the economic environment of major emerging economies like China. These channels include fluctuations in exchange rates, variations in interest rates, and shifts in international capital flows, all of which can influence trade balances, financing costs, and investment dynamics. Policy adjustments by key institutions, such as the Federal Reserve and the European Central Bank, not only trigger volatility in international financial markets but also affect the competitiveness of Chinese exporters, the cost structures of importers, and the demand patterns for Chinese goods in global markets. This paper systematically examines the mechanisms through which these external monetary shocks are transmitted to China's foreign trade sector, emphasizing both direct and indirect pathways. We identify critical nodes in the transmission process, including currency valuation effects, cross-border capital movements, and changes in global liquidity conditions, which collectively shape the risk landscape for trade-dependent firms. Furthermore, the study highlights practical strategies and policy measures that China could adopt to mitigate exposure to exogenous financial risks, strengthen the resilience of its foreign trade system, and maintain stable growth amidst complex international economic conditions. By mapping out potential transmission channels and proposing adaptive countermeasures, this research provides valuable insights for policymakers and industry stakeholders navigating an increasingly interconnected global economy.

Keywords: monetary policy spillovers; foreign trade; exchange rate transmission; capital flows; risk response (search for similar items in EconPapers)
Date: 2025
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