China issues measures to stabilize economic growth amid coronavirus outbreak
Published: Feb 03, 2020 03:48 AM

A view of the PBC’s headquarters in Beijing Photo: cnsphoto

The novel coronavirus outbreak in China is expected to harm economic growth by at least two percentage points during Q1 2020, according to forecasts. Amid a nationwide battle to contain the virus, officials have moved swiftly to implement growth stabilizing measures. 

Investors waited anxiously on Sunday for the first stock market opening since the Chinese New Year holiday. The People's Bank of China (PBC), the country's central bank announced it would inject 1.2 trillion yuan ($173 billion) into the market.

The funds will be delivered Monday through reserve repurchase operations, according to a statement from the PBC. 

The move is aimed at ensuring liquidity at Chinese banks during a "special time" to prevent and contain the outbreak, the central bank said, adding the country's banking system will have 900 billion yuan in extra liquidity compared to the same period last year. 

"This was a very necessary move that will play an important role in stabilizing economic growth and the stock market at such a critical time. It is like a timely rain," Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Sunday.

Li, who has been optimistic on economic growth, said the outbreak, while expected to exert extra downward pressure on the economy, will not change the long-term trajectory of the world's second largest economy. 

"There is no need to panic. Short-term fluctuations can only change the pace but will not change the direction of the Chinese economy moving forward," he said.

The PBC's announcement followed the central bank and four government agencies that oversee the economy, including the Ministry of Finance (MOF), the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission (CSRC), issued financial support aimed at combating the coronavirus, which has claimed over 300 people and infected over 14,000 in China as of Sunday morning. 

Chief among the 30 measures include plans to ensure sufficient liquidity through various instruments and financial policies to enable the smooth allocation of necessities, according to a central bank notice.  

Pan Gongsheng, PBC deputy governor, said the measures are not only aimed at aiding the battle against the virus but to ensure economic stability.

Li said the agency announcements on Saturday meant that further monetary measures could follow as the country continues to grapple with the economic impact caused by the virus. 

"The measures will be comprehensive and persistent to deal with this new challenge," he said.

Other than the PBC's move, various agencies have made or are planning separate measures to help fight the outbreak and the economy. The CSRC, for example, said Sunday it would release and study tools to prevent risks and ease market panic.

The MOF released measures to assist the nationwide battle against the outbreak, including offering loans with up to 50 percent discounts on interest to companies. Special financial services will also be provided for those affected by the epidemic, along with small and medium-sized businesses.

Other agencies, such as the Ministry of Commerce and the National Development and Reform Commission have taken measures to help contain the outbreak and ensure economic stability. The new measures include providing help for companies to resume production and expand foreign supplies for necessary products during this critical period.