China is to inject 1.2 trillion yuan ($174 billion) into its economy on Monday as its stock markets prepare to reopen, including providing banks with 300 billion yuan to lend to affected companies.
China’s central bank said the move would ensure there was enough liquidity in the banking system and help provide a stable currency market while protecting it from the impact of the coronavirus outbreak.
According to Reuters calculations based on official central bank data, 1.05 trillion yuan worth of reverse repos are set to mature on Monday, meaning that 150 billion yuan in net cash will be injected.
The virus has so far infected more than 14,000 people and claimed 305 lives – all but one inside China.
There will be no further delays to the reopening, the securities market regulator said in an interview in the People’s Daily newspaper on Sunday.
The China Securities Regulatory Commission (CSRC) said it had taken the decision after balancing various factors, and believed the outbreak’s impact on the market would be short term.
Wendy Wu with SCMP is sure that investors in Shanghai and Shenzhen are bracing for a possibly brutal return to trading when markets resume for the first time since the Lunar New Year holiday.
Caixinglobal reports that China’s coronavirus outbreak cost more than one trillion yuan ($144 billion) in losses to the restaurant, tourism and movie industries in seven days of the Lunar New Year Holiday, economists estimated.
The country saw economic growth of 6.1% last year – the slowest in around three decades, in part because of its prolonged trade war with the US. A partial trade deal easing tensions was struck earlier this month, but most tariffs remain in place.
According to Bloomberg, policy makers will likely “focus on ensuring financial resources flow to the places needed for the ‘firefighting’ and keeping the broad policy environment supportive” during the early stage when immediate virus control is the priority, Goldman Sachs Group Inc. economists including Andrew Tilton wrote in a Friday report to clients. “Once the epidemic is brought under control, senior policy makers will likely shift their focus to the economy” to boost infrastructure and consumption, with the size of that dependent on the severity of the outbreak, they wrote.
Most observers won’t be that optimistic as global businesses operating in China are closing stores, scaling back operations and restricting travel.
Apple is temporarily closing all of its 42 stores in China because of the coronavirus outbreak.
Starbucks closes 2,000 Chinese branches.
Foxconn, Toyota, Starbucks, McDonald’s and Volkswagen are just a few of the corporate giants to have paused operations or shuttered outlets across China.
China’s supply chain could be broken to a massive scale.
By Winnie Troppie