Mixed global prospects

Dai Jinping, a professor on financial studies at Tianjin-based Nankai University, said the nomination of Yellen is also good news for emerging economies.

Since the U.S. Fed released the first round of QE in 2008, a large amount of capital rushed to emerging markets and fueled their economic growth. But when Bernanke announced the gradual termination of the QE policy in May, foreign capital began to withdraw from these emerging economies. As uncertainty looms behind future policies of the U.S. central bank prior to the nomination of the Fed head, the withdrawal of foreign capital has caused upheaval in emerging economies' financial markets.

Dai said that if Yellen assumes the post, the end of the QE program will likely be postponed. As a result, the financial pressure on the emerging economies will be alleviated.

"The postponement could buy some time for emerging economies to readjust their domestic economic structures," said Dai.

However, Yu Fenghui, a senior economic researcher and independent commentator on economics, said the U.S. QE monetary policy only preserves U.S. interests while doing damage to the interests of other countries in the long run.

"The ultralow interest rate and the continuance of QE could inflate financial market bubbles," Yu said.

Yu argued that the nomination of Yellen might boost the global stock market, international commodity prices as well as the futures market, but it also has dangerous implications.

The continuing of the U.S. QE program will form a greater threat to the exports of emerging economies and ultimately worsen growth of the entire macroeconomy, Yu added. In the meantime, the dollar assets of countries holding large foreign exchange reserves will depreciate further, causing their wealth to vanish.

Li Daokui, Director of the Center for China in the World Economy at Tsinghua University's School of Economics and Management, also claimed that a continual push of the U.S. dollar would force the appreciation of yuan, dampening China's exports. He predicted a substantial rise of the Chinese yuan against the U.S. dollar by the end of this year.

Future challenges

After several rounds of QE, the size of the Fed's balance sheet ballooned rapidly. Abandoning the policy without causing major financial market upheaval poses a great test for the new central bank leader.

Analysts said the ending of the QE policy is unprecedented, leaving Yellen with no examples from which to take guidance. It will be a big challenge for her to reverse this prolonged and unprecedented period of monetary easing.

Moreover, a host of additional challenges are being posed by rising unemployment and inflation, a possible increase of the interest rate, as well as readjustment of fiscal and financial policies.

For other countries, professor Li of the Tsinghua University noted, the end of the U.S. QE policy would unavoidably result in capital returning to developed countries, posing potential turmoil in emerging economies. Recently, the Indian and Brazilian economies have already been affected by rumors of the removal of QE.

"The end of the QE program will likely have a limited direct influence on the Chinese economy," said Li. "Its effect on the economies of China's neighbors as well as trading partners, however, may be much more significant. As such, China must be fully prepared for any negative indirect influences."

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