China’s central bank promises easier loans to support coronavirus-hit businesses and households

Central Bank of China Photo: CFP

The People’s Bank of China (PBC), China’s central bank, on Monday rolled out a wide variety of support measures ranging from refinancing quotas to increased lending, as the country steps up efforts to ease the economic burden caused by the sudden resurgence of the coronavirus. in several cities.

Many of these policies are aimed at helping people and industries directly impacted by the coronavirus outbreak, such as logistics. But some experts said financial measures could work better in tandem with fiscal policies such as increased government spending, to rekindle a cooling market.

On Monday, the PBC announced 23 steps to provide financial services for socio-economic development and coronavirus prevention and control. The measures were deployed in collaboration with the National Foreign Exchange Administration (SAFE).

One of the main purposes is to help people get loans from banks. The central bank said it would continue to use the 400 billion yuan ($62.8 billion) lending quota that was initially used to support small loans and microloans. She added that the retrocession quota could be further increased if necessary.

The PBC said it would use several monetary policy tools including open market operations, standing lending facility and other means to provide ample liquidity to the market. It would also prevent banks from restricting or stopping lending to help businesses weather the impact of coronavirus.

Many measures are aimed directly at supporting businesses or individuals severely affected by the resurgence of COVID-19.

For example, financial institutions have been asked to offer loan extensions to logistics companies or drivers who have difficulty repaying their loans. The country will also increase credit support to airlines and airports with new lines of credit.

For people infected with the virus or who temporarily lose their income due to the epidemic, banks are asked to support them by adjusting the terms of loan repayment, such as postponing their mortgage payment.

The PBC also listed measures to provide monetary support to sectors such as agriculture, energy and 5G.

Experts said government advice has been very clear on how best to ease the burden on industries, groups and individuals in the face of the outbreak.

“The downward pressure facing the economy is significant. If China does not come up with stimulus measures to deal with the situation, it will be very difficult to meet the GDP growth target of 5, 5%,” said Xi Junyang, a professor at Shanghai University. University of Finance and Economics, told the Global Times.

Xi said the most urgent task for the government is to ease the difficulties faced by businesses due to COVID19, and these measures would help affected businesses ease their burden in meeting their short-term capital needs. term.

Zhao Xijun, co-director of the Capital Market Research Institute at Renmin University of China, told the Global Times on Monday that the highlight of the notice is its real support for industry groups by encouraging local banks to increase lending to small and micro-enterprises. companies.

“For consumers, those who cannot repay their home loans in a timely manner due to the epidemic may not be included in the personal default system,” said Zhao, another notice highlight for alleviate public concerns.

Experts said monetary policy alone cannot get China out of its economic dilemma, as the major problem is not the lack of liquidity but the scarcity of viable investment projects and banks’ concern about possible bad debts in the months to come.

“It’s difficult for lending to increase drastically,” Xi said. He added that the government should roll out more fiscal support policies to stimulate the economy, such as accelerating public investment in infrastructure projects, and one feasible method is to increase the fiscal deficit.

China has set a financial deficit target of 2.8% for 2022, which Xi said could be insufficient to deal with severe economic challenges.

Zhao said the most important thing is to ensure the normal resumption of business work and production.

“The extent to which the 400 billion yuan loan quota can play a role in reviving the economy depends on the resumption of production and factory operations once the epidemic is contained,” Zhao said. .

According to the PBC, the central bank had transferred profits of about 600 billion yuan to the central government by mid-April. The money is mainly used for tax refunds and local government tax transfers, he said.

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