Chinese central bank to support coronavirus-hit economy
China's central bank will increase support for the economy to reduce the impact of the coronavirus but it expects output to recover when the disease is under control, a leading official said.
People's Bank of China Vice Governor Pan Gongsheng said the central bank would use methods such as reserve requirement cuts and relending to commercial banks to bolster the economy, Reuters reported.
"In terms of monetary policy, the next step is to strengthen counter-cyclical adjustments, maintain reasonable and ample liquidity and provide a sound monetary and financial environment for the real economy," Pan said.
"In the context of the epidemic and the downward pressure on the economy, it is more important to maintain economic growth."
Chines policymakers are also ready to increase fiscal spending and cut interest rates to cushion the impact on first-quarter growth, Reuters said.
Travel and public health restrictions are hurting tourism, restaurants and other service businesses. Burberry reported on Friday that more than a third of its stores in mainland China were shut and that its other branches had shorter trading hours.
Many factories are also shut while the authorities try to contain the spread of the virus, which had killed 636 people at the end of Thursday including a doctor who tried to alert the public to the outbreak. Standard & Poor's warned that the virus was hitting the economy hard as it cut its estimate for annual GDP growth to 5% from 5.7% before the outbreak.
With China's economy accounting for a third of global growth the slowdown will have a significant effect on the world economy, S&P said. The most affected parts of the economy will be tourism, exports, commodity prices and disrupted supply chains, it said.
S&P said it expected the virus to be contained by March and that the economy would begin to recover in the second half of 2020. The ratings agency upped its forecast for 2021 growth to 6.4% from 5.6%.
"Most of the economic impact of coronavirus will be felt in the first quarter, and China's recovery will be firmly in place by the third quarter of this year," Shaun Roache, S&P's Asia-Pacific chief economist, said. "Uncertainty remains high, and our conviction in any particular forecast is lower than usual. Still, we feel that there is now sufficient information to refresh our baseline for China's economy this year and next."
China failed to release expected trade data for January on Friday and said it would publish the figures with February's trade numbers.
Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said the missing figures were a surprise because economists had no warning they would not appear.
"It’s possible that the double whammy of the [new year] calendar distortions, alongside then disruption from the virus led officials to refrain from publishing," Beamish said. "Calendar distortions were already unfavourable. Alternatively, the disruptions from virus containment efforts could have interfered with data collection or processing. "