More macro measures seen
Additional policy support to help bolster growth amid COVID-19
China has launched a new package of fiscal and monetary support to alleviate difficulties facing market players as part of the country’s policy mix that might further unfold in the coming weeks to offset a rise in economic challenges, experts said on Tuesday.
With the implementation of additional policy support, the country’s credit expansion and economic growth are expected to rebound from the middle of the year, they added.
The State Council, China’s Cabinet, decided at a recent executive meeting that 33 measures in six aspects will be rolled out to get the economy back on a normal track and ensure it operates within a reasonable range.
Key fiscal and monetary measures include increasing tax refunds by more than 140 billion yuan ($21 billion), allowing payment deferrals of social insurance contributions worth 320 billion yuan and doubling the scale of the support facility for inclusive loans to micro and small businesses.
Also, the country will support banks in extending principal and interest repayments this year on loans made to micro, small and medium-sized enterprises and selfemployed households, truck loans as well as mortgages and consumer loans borrowed by individuals facing temporary difficulties.
The People’s Bank of China, the country’s central bank, said on Tuesday it will put into place the financial measures announced by the State Council as soon as possible to further strengthen support for smaller businesses and self-employed households.
Meanwhile, the PBOC will roll out additional policy measures at an early date to encourage financial institutions to “spare no efforts in boosting lending” and strengthen the stability of credit growth, the central bank said in a statement.
Wen Bin, chief researcher at China Minsheng Bank, said the new measures are of great importance in helping the economy normalize from the recent COVID-19 outbreaks as they will ease financial burdens on hard-hit companies and individuals and help them get through current difficulties.
Ming Ming, co-chief economist of CITIC Securities, said the financial measures — coupled with a reduction in a key benchmark lending rate on Friday — are all targeted at addressing sluggish credit demand, a key weak link in China’s economic recovery.
China’s over-five-year loan prime rate, a market-based benchmark lending rate on which many lenders determine their mortgage rates, dropped 15 basis points to 4.45 percent on Friday, after the country’s new yuan-denominated loans were down by 823.1 billion yuan year-onyear to 645.4 billion yuan in April.
As measures to bolster credit demand filter through, market interest rates — including mortgage rates — may further decline, prop up credit expansion from June and help drive China’s economic recovery, Ming said.
It was stressed at a meeting co-hosted by the PBOC and the China Banking and Insurance Regulatory Commission on Monday that the financial system should make full use of multiple policy tools to maintain proper growth of loans, with a focus on smaller businesses, green development, technological innovation
and energy supply.
Yi Huan, chief macroeconomist at Huatai Securities, said policymakers are likely to mull more supportive measures in addition to the latest package as its strength may not be substantial enough to bring economic growth back to a reasonable pace.
It is possible for China to launch additional stimulus measures this month and in June, including issuing special treasury bonds and approving new issuances of local government bonds, Yi said.
In anticipation that more supportive measures will shore up China’s economic growth, the central parity rate of the onshore yuan against the dollar strengthened in three consecutive sessions to 6.6566 on Tuesday, up 190 basis points from Monday.