Chinese central bank to pump $ 173 b into economy in virus fight

Tuesday, 4 February 2020 01:10 - - {{hitsCtrl.values.hits}}

BEIJING (AFP): China’s central bank said Sunday it would pump 1.2 trillion yuan ($ 173 b) into the economy as it ramps up support for a nationwide fight against a deadly virus that is expected to hit growth.

The People’s Bank of China (PBOC) said in a statement it would launch a 1.2 trillion yuan reverse repurchase operation on Monday to maintain “reasonable and abundant liquidity” in the banking system, as well as a stable currency market, during the epidemic.

It added that the overall liquidity of the banking system would be 900 billion yuan ($129 billion) more than in the same period last year.

The PBOC also announced measures Saturday to step up monetary and credit support for enterprises which are helping in its fight against the virus, such as medical companies.

China’s central bank urged financial institutions to provide “sufficient credit resources” to hospitals and medical research units, among other measures.

Authorities also relaxed tariffs on goods imported for use in the virus fight – including those from the United States, with which it has been engaged in a bruising trade war for around two years.

The move to inject liquidity into its financial system comes as authorities work to shore up confidence in an already slowing economy.

The China Securities Regulatory Commission said Sunday that “the epidemic’s impact on the market is short-term, and will not affect the longer-term trend”, reported the state-run People’s Daily.

But China’s travel and tourism sectors have already taken a hit over an unusually quiet Spring Festival break this year, with large-scale events cancelled, public attractions closed and people urged to stay home to help contain the outbreak.

China has advised its citizens to postpone trips abroad and cancelled both overseas and domestic group tours.

Cinemas were made to close during what would otherwise have been a prime time for blockbuster releases.

Other countries have told their nationals to avoid travel to the country as well, with various airlines trimming their schedules.

Manufacturing has also been halted Taiwanese tech giant Foxconn is keeping its factories in China closed until mid-February, allowing more local employees to delay their return after the new year break.

Toyota, IKEA, Starbucks, Tesla, McDonald’s and Volkswagen are among corporate giants temporarily halting production or shuttering outlets in China.

Tech giant Tencent was among companies telling staff to work at home until 10 February.

China saw economic growth of 6.1% last year, the slowest in around three decades.

Analysts warn that this could weaken further if the spread of the mysterious pathogen goes on for an extended period.

Analysts at S&P said consumption contributed about 3.5%age points of China’s growth rate in 2019.

Even a 10% drop in consumption would knock about 1.2%age points off GDP, they warned.