Factbox: China takes major steps to prop up coronavirus-hit economy

22-Feb-2020 Intellasia | Reuters | 6:02 AM Print This Post

Chinese policymakers have implemented a raft of measures to support an economy jolted by a coronavirus outbreak that is expected to have a devastating impact on first-quarter growth.

The People’s Bank of China (PBOC) is attempting to restore investor confidence, while markets are shuddering at the potentially damaging impact of the virus on the global economy.

Below are some fiscal and monetary policies put in place by the government and the central bank since the outbreak:

** China cut the benchmark lending rate on February 20 to lower financing costs for businesses.

The one-year loan prime rate (LPR), the new benchmark lending gauge introduced in August, was lowered by 10 basis points to 4.05 percent from 4.15 percent at the previous monthly fixing.

The five-year LPR was lowered by 5 basis points to 4.75 percent from 4.80%.

** Banks in Shanghai have issued 1.31 billion yuan ($186.8 million) in cheap loans to 48 key firms to help tackle the outbreak that has dampened economic activity, a local government official said on Wednesday.

** The People’s Bank of China (PBOC) said on February 17 it was lowering the rate on 200 billion yuan ($28.65 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions by 10 basis points (bps) to 3.15 percent from 3.25 percent previously.

** Firms in Hubei province, the epicentre of the outbreak, will not have to pay pensions, jobless and work-injury insurance until June, state television quoted the cabinet as saying on February 18.

Small firms in other provinces will be exempt from paying pensions, jobless insurance and work injury insurance until June, while payments by large firms will be reduced by half until April.

The government will also keep the minimum purchase price for rice stable this year, it said. It will accelerate hog production and increase state reserves of frozen pork, it added.

** China’s Ministry of Finance said on February 12 that it would reopen an issue of 1-year bonds from January 9, auctioning an additional 26 billion yuan ($3.7 billion) on February 19.

The bonds will be issued from February 19 to February 20 and begin secondary market trading on February 24.

** China’s southern province of Hainan has launched the first specially designed insurance product to cover losses incurred by businesses as a result of the coronavirus outbreak in the country, the banking and insurance regulator said on February 17.

** On February 3 and February 4, the People’s Bank of China (PBOC) pumped in 1.7 trillion yuan ($242.74 billion) through open market operations.

** China’s central bank unexpectedly cuts some key short-term money market interest rates, and analysts predict more are likely. A central bank adviser says the possibility of a cut in the country’s benchmark loan prime rate (LPR) on February 20 has significantly increased.

** The central bank said on February 6 that it will use tools such as targeted reserve requirement cuts, re-lending and rediscount, to support key sectors.

The cost of special re-lending, at 300 billion yuan, from the PBOC to commercial banks is relatively low, it said.

The PBOC has told banks to cap rates on loans for selected firms at 3.15%, 1 percentage point lower than the latest LPR. ** China’s finance ministry said on February 9 that all levels of government had allocated a total of 71.85 billion yuan ($10.26 billion) as of Saturday afternoon to fight the virus. ** China’s finance ministry said on February 1 materials directly used for epidemic control will be exempt from import tariffs from January 1 to March 31.

Imports of donations including ambulances and disinfectant products will also be exempt from tariffs, value-added tax and consumption tax, the finance ministry said.** China’s bond market regulator said on February 5 it will actively support debt financing and debt issuance by companies heavily affected by a fast-spreading coronavirus outbreak.

The National Association of Financial Market Institutional Investors (NAFMII) also said it would support companies that have participated in containing the spread of the virus.

The association also said it would allow virus-hit firms to issue bonds and raise funds via other instruments including asset-backed notes.



Category: China

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