First aid: China's central bank vows to cure virus-hit economy

Shanghai/Beijing - PBOC to release more liquidity to some banks due to annual changes in assessments of targeted RRR cuts

China's central bank will take further steps to support the virus-hit economy, including releasing more liquidity and lowering funding costs for companies, a vice-governor of the bank said.
The People's Bank of China (PBOC) will guide market interest rates lower, Liu Guoqiang, the bank official, told the Financial News in an interview.
"China's monetary policy space is still very sufficient, and the toolbox is also sufficient. We are confident and able to offset the impact of the epidemic," Liu told the newspaper.
The PBOC also will release more liquidity to some banks due to annual changes in assessments of targeted reserve requirement ratio (RRR) cuts, which will free up more funds to lend to smaller firms, Liu said.
The virus and widespread transportation lockdowns put in place to contain it have caused significant disruptions to economic activity in China, with smaller, private firms such as restaurants particularly vulnerable because they have less cash on hand to tide themselves through until business recovers.
"In the near future, there will be dynamic adjustments in targeted RRR reductions for inclusive financing. More qualified banks are expected to enjoy preferential policy support, as more liquidity will be released into the banking system," Liu said.
In January 2019, the central bank released about 250 billion yuan in additional cash to banks, due to changes in assessments for banks' targeted RRR reductions announced in 2018.
The central bank will push down lending rates, especially for smaller firms, by further improving the transmission mechanism of the loan prime rate (LPR) - its new benchmark lending rate, Liu said. But he reiterated that the central bank will not resort to "flood-like" stimulus.
China has cut several of its key rates in recent weeks, and has urged banks to give cheap loans and payment relief to firms hardest hit by the outbreak.
Analysts widely expect further monetary and fiscal support measures in coming weeks, while stressing the key near-term policy challenge will be finding ways to keep companies afloat until demand recovers.

Benchmark deposit rates will also be adjusted at an appropriate time, Liu said. Speculation had been growing that a cut was being considered, which would lower banks' funding costs and give them more incentive to lower rates they charge for loans.

Liu said that the epidemic's impact on China's economy would be limited, and that Beijing would strive to meet economic and social development targets this year.

Chen Yulu, another vice central bank governor, said the country is fully confident it beat the epidemic, state media reported on Saturday.

"We believe that after this epidemic is over, pent-up demand for consumption and investment will be fully released, and China's economy will rebound swiftly," Chen said.
Transport ops to resume soon
Meanwhile, more transport sector companies in China are expected to resume operations by late-February or March, a transport official said on Saturday, as officials try to get the economy up and running again while containing a coronavirus outbreak that has created massive business disruptions.
In particular, authorities are trying to get delivery companies back in operation as quickly as possible, Wu Chungeng, an official at the Ministry of Transport, told a news briefing.
Some companies which have reopened have complained of shortages of parts and materials due to transport restrictions imposed to curb the spread of the virus, while others say they can't get finished goods to customers.
Wu added delivery services of China Post, SF Express and JD.com have resumed full operations, while 66.7 per cent of other delivery companies have restarted delivery services.
Ministry data showed over 30 per cent of China's highway and waterway transportation have resumed operations while 28 per cent of road transport companies and 41 per cent of waterway transport firms have resumed.
Major ports were operating normally, Wu said, adding that 65 per cent of port companies had resumed work.
"The railways and civil aviation transportation network is operating normally, and express delivery is steadily returning to normal," he added.