QE tapering raising spillover of risks

Late last year, the money-printing Fed announced a "modest reduction" in monthly asset purchases from $85 billion to $75 billion, with another $10 billion trimmed from mortgage-backed securities and Treasury bonds.

"The risks associated with emerging markets remain high, but the way in which QE tapering is applied can play a role in either enabling growth or throwing currencies and economies into turmoil, " FTI Consulting said in a report published Wednesday, when the annual Davos forum began.

"The global economy is more interlinked now than ever before so a lack of synchronization across the central banks deploying QE could have drastic destabilizing effects," said Mark Malloch-Brown, chairman of Europe, Middle East and Africa at FTI Consulting.

The expert also warned that inflation destabilization and the rising costs of borrowing can be possible threats to emerging economies should they give poor responses.

RMB products becoming popular

The Chinese currency has repeatedly marched to new highs against the dollar at the beginning of 2014, carrying on the strong momentum from last year.

China has signed various currency swap deals with its trading partners, evincing the RMB's rising recognition in global markets, while derivatives of currency options and RMB bonds have been gaining popularity as a result of China's steady and healthy growth over the years.

Yu Yongding, a senior fellow of the Institute of World Economics and Politics at Chinese Academy of Social Sciences, said the practice of overseas institutions issuing RMB bonds should be encouraged as a way of exporting the yuan and allowing China to become the creditor of its own currency.

However, reforms on exchange rate need to be carried out in steps to avoid external arbitrage and properly assess the impact of foreign trade on the economy in macro-terms, said the Chinese expert.