THE PEOPLE’S BANK OF CHINA will inject a single-day record 1.2 trillion yuan ($170 billion) into the economy on Monday to ensure ample liquidity in the financial system when financial markets reopen after the extended Lunar New Year holiday.
The net number will be closer to 150 billion yuan because short-term funds worth some 1 trillion yuan mature tomorrow. However, the move reflects the growing concern about the economic impact of the Wuhan coronavirus outbreak.
The tourism and travel industries have been hardest hit with the clampdown on travel over the Lunar New Year holiday. Numerous businesses, domestic and multinational, have shut retail outlets and suspended factory production.
The central bank says it stands ready to make further liquidity injections in coming days if necessary.
Other economic support measures include relaxing tariffs on imports of medical supplies, central bank support for lower bank lending rates to support companies and delayed introduction of new asset management regulations that were part of the crackdown on shadow banking.
It is far too early to estimate the economic impact of the outbreak. Public health emergencies such as this tend to cause short-term economic dislocation but little long-term damage. As the control measures for the coronavirus outbreak have been so draconian, the near-term economic costs could be severe, depending on how long the outbreak continues. Some economists have predicted that it could shave as much as a percentage point off economic growth in the first quarter.
Update: Chinese stocks closed down 7.9% on February 3 after financial markets reopened following the Lunar New Year holiday. The fall in the CSI 300 index of Shanghai- and Shenzhen-listed equities wiped out some $358 billion of market capitalisation.
As of the end of February 2, there were 17,205 confirmed cases of the Wuhan coronavirus officially reported in China and 361 deaths.