China's central bank vows more steps to support virus-hit economy


  • Economy
  • Saturday, 22 Feb 2020

The People's Bank of China (PBOC) will guide market interest rates lower and keep liquidity appropriately ample to help companies affected by the coronavirus epidemic, Liu Guoqiang, the bank official, told the Financial News in an interview.

SHANGHAI/BEIJING: China's central bank will take further steps to support the virus-hit economy, including releasing more liquidity and lowering funding costs for firms, a vice governor of the bank told state media.

The People's Bank of China (PBOC) will guide market interest rates lower and keep liquidity appropriately ample to help companies affected by the coronavirus epidemic, Liu Guoqiang, the bank official, told the Financial News in an interview.

The PBOC will release more liquidity to banks by adjusting the criteria for targeted reserve requirement ratios (RRR) cuts, Liu said.

"China's monetary policy space is still very sufficient, and the toolbox is also sufficient. We are confident and able to offset the impact of the epidemic," Liu told the newspaper.

The central bank will push down real lending rates, especially for small firms, by further improving the transmission mechanism of the loan prime rate (LPR) - its new benchmark lending rate, Liu said.

Liu reiterated that the central bank will not resort to "flood-like" stimulus.

China has cut several of its key rates in recent weeks, including the benchmark lending rate on Thursday, in a bid to reduce financial strains on companies facing severe business disruptions due to the outbreak. Investors widely expect further monetary and fiscal support measures in coming weeks.

Benchmark deposit rates will also be adjusted at an appropriate time, Liu said.

Liu said that the epidemic's impact on China's economy would be limited, and that Beijing would strive to meet economic and social development targets this year.

Chen Yulu, another vice central bank governor, said that the coronavirus' impact on China's economy will be short-term and limited, and that the country is fully confident it beat the epidemic, state media reported on Saturday.

"We believe that after this epidemic is over, pent-up demand for consumption and investment will be fully released, and China's economy will rebound swiftly," Chen said.

China's economic growth may show a sharp slowdown in the first quarter, probably dipping to 3% or even lower from 6% in the previous quarter - which was the weakest pace in nearly 30 years, economists estimated.

The central bank also is closely monitoring consumer prices, which could be disturbed by the virus epidemic, Liu said.

Seasonal factors and the virus' impact were behind the flat M1 money supply, or cash in circulation plus corporate demand deposits, in January from a year earlier, Liu said.

Liu also said China's economic fundamentals were sound, adding it had ample foreign currency reserves to support its yuan currency.

Meanwhile a senior Chinese central banker said that coronavirus' impact on China's economy is short-term and limited, and the country is fully confident that it will win the war against the epidemic, state media reported on Saturday.

Chen Yulu, deputy governor of the People's Bank of China, said that China has ample policy tools to manage the economy, and that its accommodative monetary policy remains unchanged, according to China Central Television (CCTV).

Chen also said that the Chinese currency will not appreciate or depreciate by a big margin, and the country's financial system is highly resilient in the face of risks.

In other developments retail sales of passenger cars in China crumbled 92% on an annual basis in the first 16 days of February, according to China Passenger Car Association (CPCA), as the coronavirus outbreak slammed the brakes on businesses across the country.

China's passenger vehicle sales recorded 4,909 units in the first 16 days, down from 59,930 vehicles in the same period a year earlier, data from CPCA showed, the first major figures to demonstrate just how hard the epidemic is hitting the world's biggest auto market.

"Very few dealerships opened in the first weeks of February and they have had very little customer traffic," it said.

Mainland China recorded 889 new confirmed cases of coronavirus infection on Thursday. The death toll also rose by 118 to 2,236, mostly in the Hubei provincial capital of Wuhan where the outbreak began, and which remains under virtual lockdown.

China's auto market is likely to see sales slide more than 10% in the first half of the year due to the coronavirus epidemic, and around 5% for the whole year, provided the epidemic is effectively contained before April, the country's top auto industry body, the China Association of Automobile Manufacturers (CAAM), told Reuters last week.

To stablise the market, where more than 25 million vehicles were sold last year, China's commerce ministry said it will introduce more measures to boost auto consumption.- Reuters

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