TheChinesegovernmentistakingforcefulpreventionandcontrolmeasuresinresponsetotherecentoutbreakofthenovelcoronavirus,knownasCovid-19.ThecontagionhasexertedsomedownwardpressureonChina’seconomy,butitwillnotlastlong.Supportedbyaresilienteconomyandampleroomforpolicyadjustments,thePeople’sBankofChinaexpectsaquickrecoveryaftertheoutbreakiscontained.

Growthisslowingdownintheshortrunduetotheepidemic.Transportation,tourismandofflineshoppinghavebornethebrunt.Medicalcare,onlineshoppingandtheinternetsectorsaremoreresilient.Consumptionofnon-essentialgoodswilldroptemporarily,butthelong-termtrendofincreasedandupgradedspendingremainswelloncourse.Somesmallandmedium-sizedenterprisesarerunningatpartialcapacitybuthavecontinuedpayingwagesandotherexpenses.Theyfacecashflowpressuresatthemoment.

Althoughthefinancialmarketsexperiencedlarge-scalecorrectionswhentheyreopenedaftertheSpringFestivalholiday,theyhavereboundedandstabilised.

ThesoundfundamentalsofChina’seconomyinthemediumandlongtermremainunchanged.Chinahasstrongendogenousgrowthmomentumthatissupportedbythegrowingservicesectorandbyinnovation-drivenindustrialupgrading.Theseunderpinningsofhigh-qualitygrowthwillnotreverseduetotheepidemic.

Meanwhile,Chinahassufficientpolicyspacetosupportsteadyeconomicgrowth.Chinaisoneofthefewmajoreconomiesintheworldthathavemaintainednormalmonetarypolicy.Equippedwitharichpolicytoolkit,Chinaiscapableofcopingwithvariousuncertainties.OurexperiencewiththeSARSoutbreakisverytelling.Thankstowell-targetedprovisionofcredittoepidemiccontrolandothermeasures,China’seconomyreboundedquicklyaftertheviruswasbroughtundercontrol.

Thistime,theChinesegovernmentrespondedquicklytotheoutbreakofthecoronavirusepidemicandintroducedsupportivepolicies,includingfiscalandfinancialmeasures,whichhavehelpedcontaintheimpactoftheoutbreakandstabiliseeconomicgrowth.

ThePBoChasstrengthenedcountercyclicaladjustmentsofmonetarypolicythroughopenmarketoperations.Thishasensuredreasonableandadequatelevelsofliquidityandhelpedtoboostmarketconfidence.ThePBoC,withotherfinancialregulators,rolledout30policymeasurestosupportenterprisesheavilyaffectedbytheepidemic,inparticularsmallandmicroones,privateenterprisesandthemanufacturingsector.

ThecentralbankalsoprovidedRmbbninspecialcentralbanklendingtolargebanksandselectedlocalbanksinHubeiandotherseverely-hitprovinces.Itprovidescreditsupportatpreferentialinterestratestomanufacturersofessentialmedicalsuppliesanddailynecessities.Thesepolicieshaveprovedsignificantlyeffective.ManySMEsseriouslyaffectedbytheepidemicweregivenaccesstonewbankloans.Preferentialloanstoarapidly-identifiedlistofeligibleenterprisesarereceivingfast-trackapproval.Financialregulatorshavealsoensuredthestablefunctioningofmarketsbyensuringtheuninterruptedoperationoffinancialinfrastructure.

Ingeneral,theimpactofthecoronavirusoutbreakontheChineseeconomywillmainlybeintheshortrun.WithstrongandeffectivemeasurestakenbytheChinesegovernment,thePBoCexpectsthattheepidemicwillgraduallybebroughtundercontrol,andeconomicgrowthwillreboundtoitspotentialoutputlevel.

Asthepostponedconsumptionandinvestmentactivitiesresume,theeconomyisexpectedtoexperiencea