Coronavirus (COVID-19), which had first appeared on December 12, 2019 in Wuhan, capital of Hubei province of China, is still a reason for global concerns. Following the US, the virus was seen in Europe. Now, it spread in Iran and according to ILNA, at least 50 people died due to the coronavirus. The virus in question would have a negative impact on global economic activities and it is strengthening day by day in China, which is the focal point of these virus-related concerns.
Although it has already been acknowledged in the markets that the virus, which killed 2,594 people, will significantly damage the Chinese economy in the first quarter, the Chinese government and the People’s Bank of China (PBOC) are taking coordinated steps to prevent the economic slowdown.
First, People’s Bank of China took a solid step to support the economy in its February monetary policy meeting. PBOC cut one-year Loan Prime Rate (LPR) 10 bps, from 4.15 to 4.05. It also cut five-year LPR 5 bps, from 4.80 to 4.75. Chen Yulu, deputy governor of PBOC, made a critical statement following the decision and said that the coronavirus will have short-term and limited effects on Chinese economy. He further noted that he believes China will win this war soon and that they established a special credit fund amounting to 300b Yuan to give financial support to companies fighting against the virus.
On the other side, Chinese President Xi Jinping had said they were committed to implementing more flexible fiscal policy to revive the economy, which is grappling with the virus epidemic. Today Asian markets started the new week with steps Xi Jinping made his commitment. Chinese President Xi Jinping stated that the fight against the coronavirus epidemic is still at a critical stage and that the government will increase policy support to achieve the 2020 economic and social development goals despite the outbreak. In addition, upon announcing that small companies will introduce gradual tax reductions to overcome difficulties, Chinese Deputy Finance Minister Ou Wenhan said that they allocated 99.5 billion yuan ($ 14.16 billion) to be used in efforts to prevent the coronavirus outbreak at a press conference.
Following this step of the Ministry of Finance, the Chinese Ministry of Commerce announced that it implemented 20 measures to help the businesses to return to their normal activities and to protect the stability of foreign trade and foreign investments. In the statement of the Ministry, it was stated that the measures were taken to support foreign trade, foreign investment and e-commerce companies to start their activities again, to contribute to carry out the large road construction projects in a stable manner, simplify foreign trade management order and strengthen legal services to reduce the risks faced by companies.
In addition, the Ministry of Transport of the People’s Republic of China announced that construction projects appropriate with the country’s development strategy will be accelerated. China expects to invest 1,800 billion yuan ($ 257 billion) in the construction of roads suitable for road and ship navigation by 2020, and the Ministry of Transport will actively support effective investments towards achieving that goal, the statement further noted.
Within the scope of the fiscal policy of the Chinese government and the PBOC’s loose monetary policy, we observed various moves by the Chinese authorities to limit the negative effects of the Coronavirus outbreak, which has been predicted to have greater effects than the SARS virus. However, we would like to remind you that Chinese Deputy Minister of Science and Technology Shu Nanping had said the clinical tests of the vaccine developed against COVID-19 will begin at the end of April at the earliest. Although we say that the steps taken by both the central authority and the PBOC are quite consistent, experts say there is/will be no permanent solution for the Coronavirus outbreak in the short term.
Chinese authorities had reiterated their views on a significant slowdown in Q1 growth rates of China, and the data showing that COVID-19 will continue to be on the agenda and that the negative effects on global economic activities will continue, would lead Chinese government and developed and emerging countries’ authorities to take various measures.