China targets epidemic-hit areas with stimulus, easier rules


  • Economy
  • Saturday, 01 Feb 2020

The central bank will use open market operations, the standing lending facility and other tools to ensure interbank liquidity is sufficient to keep money market rates stable, the People’s Bank of China said in a joint statement with other ministries and financial regulators on Saturday.

BEIJING: China’s central bank and other regulators announced a slew of targeted measures aimed at helping companies, banks and individuals hurt by the viral pneumonia outbreak.

The central bank will use open market operations, the standing lending facility and other tools to ensure interbank liquidity is sufficient to keep money market rates stable, the People’s Bank of China said in a joint statement with other ministries and financial regulators on Saturday.

The PBOC urged banks to increase lending to the whole economy, and said it will give banks 300 billion yuan ($43.4 billion) in relending to help them provide more money to a list of affected companies. Banks were told they shouldn’t withdraw loans from firms affected by the virus, especially from smaller ones.

Banks should also consider rolling over loans or cutting interest rates to help affected companies, and regulators will allow those firms to delay reporting their results for 2019 and the first quarter of 2020.

Lending Boost

The new measures follow the announcement last week that China’s biggest banks will lower interest rates for firms in Hubei, the center of the outbreak. In the Saturday statement, financial institutions were told to maintain the pace of overall credit expansion and continue to lower borrowing costs across China, especially to manufacturers, and to small and private firms.

The PBOC will "keep close contact with financial institutions and financial markets to stay fully on top of the liquidity situation and demand, ” PBOC Deputy Governor Pan Gongsheng said in an Q&A with the bank’s newspaper, Financial News, which was released at the same time as the announcement. The PBOC will "release policy information in a timely manner and guide market expectations, ” he said.

Pan also said the central bank will temporarily waive the cap for foreign exchange settlement for companies in need, as long as it’s for reasons related to the virus.

The central bank will be less strict in its checks on banks’ required reserves at the end of January, and will facilitate companies’ use of foreign exchange to ensure that offshore borrowing isn’t impacted and goods needed to battle the virus can be imported without problems.

Looser Bond Rules

Exchanges were asked to streamline corporate bond sales including by allowing financial institutions to submit materials online, in a bid to reduce the spread of the virus. Any private bonds or asset-backed securities sold to finance the fight against the coronavirus will be approved using simplified procedures.

The impact of the outbreak will be temporary, the Chinese economy will maintain good momentum, and financial regulators have "full confidence” they can keep the economy stable in the long term, according to the statement. Investors should look at the long term and uphold the principle of value investing, and not get affected by "irrational sentiment.”

In a separate Q&A, Cao Yu, vice chairman of the banking and insurance regulator, also called for lower lending rates and fees and pledged to take steps to make sure companies’ financing demands were met, including by allowing banks to increase bond investment and set up more wealth-management companies. Firms with difficulties meeting the asset-management rules by the end of 2020 can have a suitable extension, Cao said. - Bloomberg


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