JOIN USCheap credit, rate cut: What China is doing to protect its market from coronavirus impact
China’s deadly coronavirus outbreak has been met with a wide-ranging response from policymakers seeking to cushion the economy, support financial markets and bolster investor confidence. Here’s a look at some of the steps taken, along with market reaction.
Wednesday, March 4
Some Signalling: The likelihood of Chinese policymakers to further cut rates in open market operations this month is “not small,” state-run China Securities Journal wrote in a front page commentary.
Sunday, March 1
Debt Relief: Regulators provided more details on a prior pledge to extend repayment periods, saying qualified small- and medium-sized businesses with principal or interest due between Jan. 25 and June 30 can apply for a delay to the end of the second quarter. In Hubei province, the center of the outbreak, the waiver applies to all companies.
Tuesday, Feb. 25
Cheap Credit: China will offer 500 billion yuan ($71.2 billion) of relending and rediscounting funding to commercial banks for loans to small firms and the agricultural sector. The interest rate of the funding will be lowered by 25 basis points. The government will also waive value-added taxes for small firms in Hubei from March to May, and lower the tax rate to 1% from 3% for small firms in the rest of the country
Monday, Feb. 24
Considering Cuts: The People’s Bank of China is reviewing whether to cut the benchmark deposit rate due to the outbreak of the coronavirus, according to Deputy Governor Chen Yulu, who also said the central bank will guide borrowing costs lower.
*MARKET REACTION: China’s stock market turnover tops one trillion yuan for the fourth consecutive day, the first time that has happened since Nov. 2015.
Saturday, Feb. 22
Support Banks: A PBOC officials says the central bank will conduct a financial inclusion review soon on commercial banks and offer qualified lenders discounts on their reserve ratios.
Friday, Feb. 21
Changing Stance: China’s top leaders pledge “more flexibility” in monetary policy and to be more “proactive” in using fiscal policy, indicating a greater easing bias compared with their previous stance, according to meeting details released late Friday.
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MARKET REACTION: The CSI 300 Index adds more than 4% this week, its largest gain since June, while the Shanghai equity benchmark is set for its biggest weekly outperformance versus MSCI’s global gauge in almost a year.
Thursday, Feb. 20
Even Lower: China’s banks lowered the benchmark borrowing costs for new corporate and household loans. The one-year loan prime rate was lowered to 4.05% from 4.15% last month, and the five-year tenor was set at 4.75%, down from 4.8%.
Tuesday, Feb. 18
* MARKET REACTION: China’s stock recovery nears $1 trillion, drawing skeptics preparing for a sell-off. Expectations that the PBOC will continue easing monetary policy pushes China’s yield curve to its steepest level since 2015.
Monday, Feb. 17
Rate Cut: The PBOC provides medium-term funding to commercial lenders and cuts the interest rate it charges for the money, offering 200 billion yuan of one-year loans. The rate is lowered by 10 basis points to 3.15%, the lowest since 2017.
* MARKET REACTION: The CSI 300 recoups all of its losses following the record $720 billion sell-off across the nation’s stock market.
Sunday, Feb 16
Fiscal Support: With the death toll and number of infections continuing to climb, China says it will implement measures to reduce corporate taxes and cut government expenses.
Saturday, Feb. 15
Price Rises: Financial regulators and central bank hold joint press conference, stressing the virus outbreak won’t cause large price rises.
Friday, Feb. 14
Grace Period: China’s banking regulator takes a further step to shield the industry, saying that defaults resulting from the coronavirus outbreak won’t be included in non-performing loans for a period of time.
Thursday, Feb. 13
Rating Firms: Securities Association of China issues guidance for credit ratings firms, calling on them to be “reasonable and prudent in adjusting ratings.”
Tuesday, Feb. 11
Sell Debt: China says it will allow local governments to sell another 848 billion yuan of bonds before March, as authorities continue to look for ways to offset the economic shock of the coronavirus.
Saturday, Feb. 8
Debt Financing: China to take more steps to support debt financing for companies fighting the virus, according to the country’s top economic planner.
Friday, Feb. 7
Prioritize Growth: Finance industry regulators hold first joint press conference post-virus; central bank official says growth will be prioritized over debt control.
Tuesday, Feb. 4
More Support: Central bank pumps a net 400 billion yuan into the banking system, the largest single-day addition since January 2019. It also sets the yuan’s reference rate stronger than the currency’s official close on Monday and the key 7 level.
Monday, Feb. 3
Liquidity: The PBOC adds a net 150 billion yuan to money markets. The total injection announced is 1.2 trillion yuan, the largest single-day addition of its kind in data going back to 2004.
Rate Cut: Central bank trims the rates it charges for 7-day and 14-day reverse repurchase agreements by 10 basis points each.
Yuan Fix: China sets yuan fix stronger than the key 7 per dollar level as markets reopen.
* MARKET REACTION: Chinese stocks see their worst rout since the burst of an equity bubble in 2015. The CSI 300 Index of companies listed in Shanghai and Shenzhen closes 7.9% lower while the yuan weakens past 7 per dollar.
Saturday, Feb. 1
Countering Coronavirus: China’s central bank and regulators across the foreign exchange, securities, banking and insurance sectors issue more than 30 supportive measures to counter the impact of the coronavirus outbreak. Among them:
- Provide banks 300 billion yuan for relending
- Extend grace period on new asset management rules for some firms
- Lower lending rates and fees for companies most affected by the outbreak
- Allow some insurers to raise their investment in equities from existing cap
- Permit some share-pledge contracts to be extended by as long as six months
- Open “green channels” for issuing bonds related to fighting the outbreak