New coronavirus will likely push China to step up stimulus

  • A pneumonia-causing virus is beginning to disrupt China’s economy, and analysts expect more support for the economy overall is likely to come.
  • Already, China’s Ministry of Finance said that as of 5 p.m. on Wednesday, finance ministries at all levels of government have issued 27.3 billion yuan ($3.94 billion) in subsidies for prevention and control of the virus.
  • In the wake of a nationwide holiday extension by three days, the People’s Bank of China also emphasized it will monetary policy tools to ensure sufficient liquidity.

BEIJING — The Chinese government is beginning to pour out billions to help those affected by the new coronavirus, and analysts expect more support for the economy overall is likely to come.

A pneumonia-causing virus emerged about a month ago in the city of Wuhan in the Hubei province. The disease has since killed more than 200 people and spread overseas, prompting the World Health Organization to call the new coronavirus a global health emergency.

The virus is beginning to disrupt China’s economy, although it’s unclear whether the impact will extend to the full year.

“We expect Beijing to introduce a raft of measures to provide liquidity and credit support for the economy,” said Ting Lu, chief China economist at Nomura, said in an email Thursday.

“However, we don’t think these (monetary and fiscal policy) measures would turn the economy around in the near term, as the virus outbreak may further weaken domestic demand and thus render the upcoming policy easing less effective,” he said.

Source: https://www.cnbc.com/2020/01/31/new-coronavirus-will-likely-push-china-to-step-up-stimulus.html

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