After the implementation of QE4 by the Federal Reserve, a large amount of foreign capital may flood into China, pushing up the RMB exchange rate and hurting export enterprises. In order to stabilize the RMB exchange rate, the Central Bank of China keeps buying foreign exchange, putting in base currency, forming derivative deposits through commercial banks, increasing the social money supply, aggravating inflation and increasing the raw material cost of production enterprises. Tight monetary policy to combat this imported inflation by raising interest rates will not only hurt domestic enterprises, but also push up the RMB exchange rate and attract more foreign exchange to China, forming a vicious circle. It can't solve a series of negative problems.

At present, domestic enterprises in China are in urgent need of funds for survival and development, and adopting loose monetary policy can stabilize economic growth and promote consumption. Reducing interest rates reduces the loan interest of domestic enterprises and reduces financial costs; RRR interest rate cuts provide sufficient funds for commercial banks to lend to the society. By relaxing monetary policy, we will curb the excessive appreciation of RMB, reduce the attractiveness of RMB to international hot money, and prevent international capital from flooding into China.

Of course, the above-mentioned monetary policy must be combined with clear industrial policy and fiscal policy in order to play an active and effective role. In terms of industrial policy, it is necessary to develop emerging industries and service industries, eliminate excess capacity, and guide social funds to invest in areas that are green, environmentally friendly, energy-saving and beneficial to national life. In fiscal policy, tax reduction will be implemented to improve the welfare of social citizens and promote the great development of domestic consumption and service industry.

The premise of loose monetary policy is that there must be obvious foreign exchange flowing into China, thus pushing up the RMB exchange rate continuously. Moreover, China's export volume will drop significantly statistically, so the central bank will loosen the currency, because once the principle of derivative deposits is relaxed, it will be impossible to accurately estimate the increase in the quantity of social money supply and its impact on various fields of the national economy, which will make the situation even more difficult to control.