After the Virus, Boosting the Real Economy

          COVID-19 has been tough on many companies and workers in China's real economy. After losing a month's revenue or more, many smaller companies and factories simply don't have the cash to get going again.

          In addition, complex international supply chains depend on financial connections just as much as they do on good transport－but many firms now fear to ship products because they don't know whether their trading partner is solvent.

          The Chinese government is implementing specially targeted assistance for highly impacted businesses. This, combined with general macroeconomic stimulus, will be essential to unblocking virus-related bottlenecks in the economy.

          In a Feb 23 speech to a Beijing meeting on the prevention and control of the novel coronavirus, President Xi Jinping said COVID-19, the disease caused by the novel coronavirus, will inevitably deal a relatively big blow to China's economic and social development. However, at such a time, it is even more important to view China's development in a comprehensive, dialectical and long-term perspective and firm up confidence.

          In general, the fundamentals of China's long-term sound economic growth remain unchanged, Xi said.

          He stressed strengthening the regulation role of macroeconomic policies, calling for more positivity in the country's proactive fiscal policy and the rollout of more targeted interim policies in cutting taxes and fees to help micro, small and medium-sized firms tide over difficulties.

          The February edition of the CKGSB Business Conditions Index, based on surveys by the Cheung Kong Graduate School of Business in Beijing, shows that both consumer prices and producer prices have fallen in February. This type of deflation is exactly the classic situation for which economists almost universally agree that large-scale monetary and fiscal stimulus is appropriate.

          To more directly support small and medium-sized companies hurt by the virus, the PBOC is allowing banks to issue special purpose bonds to raise funds for them. In addition, businesses are being allowed to defer payment of social employment taxes and many businesses are receiving reduced rent or being allowed to delay payment. Banking regulators also announced that companies affected by the virus may be allowed to make late payments on loans.

Source: Steelhome