China Signals More Easing to Shore Up Virus-Weakened Economy More (Bloomberg) — China’s top leaders signaled they will increase fiscal and monetary stimulus this year, as the coronavirus outbreak hammers the world’s second-biggest economy.
At a Friday meeting chaired by President Xi Jinping, officials pledged to be more “proactive” in using fiscal policy and exercise “more flexibility” in monetary easing. The wording indicates a greater easing bias compared with the stance that was endorsed at a top-level economic meeting in December, where the Communist Party leadership laid out stimulus plans for 2020.
In a separate statement from the central bank over the weekend, Deputy Governor Liu Guoqiang said the People’s Bank of China will free up part of the reserves of some commercial lenders to unleash long-term funding to the economy, and consider adjusting the benchmark deposit rate at an appropriate time.
The coronavirus has forced officials to keep millions of people at home and away from work, curtailing businesses. The epidemic is weighing on an economy that was already growing at its slowest in three decades, with ratings company S&P Global warning that a prolonged public health crisis could cause the bad loans ratio in China’s banking system to more than triple.
“We expect policy loosening to be broad based with the main difference from previous loosening cycles likely to be in the property area,” Song Yu, chief China economist at Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.’s mainland joint-venture partner, wrote in a note.
“It appears increasingly likely that the budget deficit will be adjusted, though any adjustment will likely be small, no more than 3.5% as an upper limit,” he said. “But the broader augmented fiscal deficit, which incorporates items such as proceeds from special bond issues, will surely be significantly larger.”
A separate teleconference meeting took place on Sunday, with government officials all the way down to the county level, according to state-run news agency Xinhua. Xi told attendees that the outbreak is the “most rapid, widespread and difficult to contain” public health crisis China has faced since the founding of the People’s Republic in 1949.
The PBOC will soon conduct a financial inclusion review on commercial banks and offer qualified lenders discounts on their reserve ratios, Deputy Governor Liu said on the central bank’s WeChat account. Authorities will keep liquidity sufficient and continue to use targeted re-lending and re-discounting funding to help small firms, he said.
Liu also repeated an […]