International

China’s Central Bank To Start Re-Lending Funding To Fight Virus

pboc-coronavirus-re-lending

China’s central bank will release a set of funds intended to combat the coronavirus this week, and will begin to offer the service on a weekly basis soon, according to Bloomberg.

The Peoples’ Bank of China (PBOC) said the move was intended to cushion the impact of the deadly virus, which has killed over 800 people in the country. The virus has also been affecting profits for businesses, as retail spending and industrial production have been weakened. Economic analysts have tempered their expectations in the wake of the news.

Economists at Barclays issued a statement saying that the lethal virus, comparable to the outbreak of SARS, has had implications far-reaching for all kinds of industries — and even if the virus is contained, the economic impact would show in China’s first-quarter activity.

Because of that, the PBOC has prioritized growth over debt and is moving to inject cash into the system in an emergency manner.

So far, there are nine major national banks and some local ones that qualify for the special funding, according to PBOC Deputy Governor Liu Guoqiang, who added that those institutions should be prepared to speed up loan applications and also to release them within two days.

PBOC said the funds will be earmarked for activities and production related to fighting the coronavirus. Banks and institutions will have to offer loans from special re-lending funds at up to 100 basis points below the one-year Loan Prime Rate, according to the directions from PBOC.

Depending on how quickly the virus is contained, the economic effects might not be so dire, and travel and factory production restrictions could be lifted quicker if the virus is defeated sooner. But, as Chetan Ahya, chief economist at Morgan Stanley, noted, there are still uncertainties as to the timeline for that.

The coronavirus outbreak has caused massive loss of life and has other effects through the financial realms, such as the potential drop in U.S. revenues from a decline in Chinese tourism and a snag in the production of iPhones due to factories closing.

As the virus has spread, companies have set up assistance such as Alibaba’s platform to help people access medical supplies efficiently.

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