February 11, 2020 / 7:18 PM / 4 days ago

China takes major steps to prop up coronavirus-hit economy

(Reuters) - Chinese policymakers have implemented a raft of measures to support an economy jolted by a coronavirus outbreak that is expected to have a devastating impact on first-quarter growth.

The People’s Bank of China (PBOC) is attempting to restore investor confidence and as global markets shudder at the potentially damaging impact of the virus on world growth.

Below are some fiscal and monetary policies put in place by the government and the central bank since the outbreak:

** China’s Ministry of Finance said on Feb. 12 that it would reopen an issue of 1-year bonds from Jan 9, auctioning an additional 26 billion yuan ($3.7 billion) on Feb. 19.

The bonds will be issued from Feb 19 to Feb 20 and begin secondary market trading on Feb. 24.

** On Feb. 3 and Feb. 4, the People’s Bank of China (PBOC) pumped in 1.7 trillion yuan ($242.74 billion) through open market operations.

** China’s central bank unexpectedly cuts some key short-term money market interest rates, and analysts predict more are likely. A central bank adviser says the possibility of a cut in the country’s benchmark loan prime rate (LPR) on Feb. 20 has significantly increased. ** The central bank said on Feb. 6 that it will use tools such as targeted reserve requirement cuts, re-lending and rediscount, to support key sectors.

The cost of special re-lending, at 300 billion yuan, from the PBOC to commercial banks is relatively low, it said.

The PBOC has told banks to cap rates on loans for selected firms at 3.15%, 1 percentage point lower than the latest LPR. ** China’s finance ministry said on Feb. 9 that all levels of government had allocated a total of 71.85 billion yuan ($10.26 billion) as of Saturday afternoon to fight the virus. ** China’s finance ministry said on Feb. 1 materials directly used for epidemic control will be exempt from import tariffs from Jan. 1 to March 31.

A customer pushes a cart while shopping inside a supermarket of Alibaba's Hema Fresh chain, following an outbreak of the novel coronavirus in Wuhan, Hubei province, China February 11, 2020. REUTERS/Stringer

Imports of donations including ambulances and disinfectant products will also be exempt from tariffs, value-added tax and consumption tax, the finance ministry said. ** China’s bond market regulator said on Feb. 5 it will actively support debt financing and debt issuance by companies heavily affected by a fast-spreading coronavirus outbreak.

The National Association of Financial Market Institutional Investors (NAFMII) also said it would support companies that have participated in containing the spread of the virus.

The association also said it would allow virus-hit firms to issue bonds and raise funds via other instruments including asset-backed notes.

Compiled by Saumyadeb Chakrabarty, Bernard Orr and Shailesh Kuber

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