make investments worth billions in various infrastructure projects along these routes, thus stimulating trade between countries situated along these routes as well as between them and china. at the same time, the chinese hope that the payment flows stemming from these trading activities will help them to encourage use of the renminbi in those countries. the chinese government ’ s hopes not only concern the success of the projects in the various emerging markets along the silk road. rather, it is hoped that trade relations with germany as europe ’ s largest economy will also be strengthened. in fact the german town of duisburg, with the biggest inland port of its kind in europe, represents the “ western ” end of the trade route often referred to as the “ new silk road ”. and in this context, the frankfurt financial centre, given its position as a one of 23 renminbi clearing hubs worldwide, would be forming the link for payment flows between germany and china. 3 / 5 bis central bankers'speeches recently, however, china ’ s efforts have met with more and more obstacles. for example, the additional tariffs on chinese goods and the threat of a trade war with the united states are damaging relations between the two countries, with negative repercussions for global equilibrium. this can have an adverse effect on the entire world economy, as there are only ever losers in a trade war. imposing tariffs and retaliatory tariffs undermines an important foundation of our prosperity. however, at the recent meeting of the international monetary fund ( imf ) in bali, both the united states and china indicated that neither was interested in an escalation of the trade conflict. i very much hope that this proves to be the case. in debate, the chinese government is often accused of taking advantage of a depreciation of the renminbi, risking a downward spiral in the process. yet studies to date show that china has no wish for an artificial devaluation. at the meeting in bali, dr yi gang, president of the people ’ s bank of china ( pboc ), also promised that china would not initiate a spiral of depreciation in the trade conflict. rather than take part in a race to the bottom, china would like the market to continue to determine the exchange rate. this stance is a most welcome one. against the backdrop of loosened monetary conditions, the pboc successfully implemented a number of measures to halt the downward trend of the renminbi, which persisted until the middle of august.

rates have already come down, or that the ecb is “ following ” markets, misses the direction of causality. the transmission of asset purchases to the real economy how does the asset purchase programme add extra monetary stimulus to the euro area economy? it does so along five dimensions. the first is the overall size of our interventions, which will be substantial. the second is the pace, which will accelerate to €60 billion per month. the third is the composition of purchases, which will include securities issued by euro area sovereigns and eu institutions. the fourth is the maturity, which extends from 2 to 30 years. and the fifth dimension is the horizon of our new measures, which will last until end - september 2016 or until we see a sustained adjustment in the path of inflation consistent with our aim of achieving inflation rates close to 2 % over the medium term. this combination of features will provide for full control over the scale and intensity of the monetary stimulus. and while it will work through several transmission channels, we expect it to be particularly powerful in terms of portfolio rebalancing effects. put simply, the displacement of investors ’ portfolios will be larger, faster and take place across more market segments. this should also help reduce market segmentation arising from excess risk aversion, improve confidence and lead to a generalised easing of financing conditions for euro area firms and households. while such effects have been extensively studied in other jurisdictions where large - scale asset purchases were introduced, the way in which they work may differ in the euro area compared with other regions given our specific financial structure – namely the prevalence of bank - based over market - based intermediation. indeed, i expect that an important transmission channel for our new measures will be via banks. banks may tend to follow a pecking order strategy in their response to large - scale asset purchases. in the first instance, those that sell their securities to the central bank, and thus have an excess reserve position, may react by paying down market debt. this would create scarcity in bond markets, thus inducing a portfolio rebalancing effect and leading in turn to a compression of yields. when this liability management reaches its limit, we would then expect that those more favourable market funding conditions to translate into lower lending rates for borrowers in the real economy – which is a key aim of our measures. this should be aided by the effect of portfolio rebalancing on the returns on securities and its implication for banks ’ decisions to grant loans.