UNITED STATES (OBSERVATORY NEWS) — China announced on Sunday pumping large amounts of liquidity into the economy to help it resist the shock of the emerging Corona virus, on the eve of the reopening of financial markets at the end of a long lunar New Year holiday.
And between the paralyzed economy, factories and closed shops and a future fraught with skepticism and declining confidence, the Chinese central bank will pump from Monday 1200 billion yuan (156 billion euros) to reduce the impact of the epidemic that affected 14 thousand people and claimed more than 300 people, and moved to more than twenty countries.
The Central Bank said in a statement that this intervention aims to maintain “reasonable and abundant liquidity” of the banking system, as well as to ensure the stability of exchange markets.
Monday morning sessions on the Shanghai and Shenzhen stock exchanges could drop sharply. The two exchanges have been closed since January 24, the day after the stone was physically imposed on the city of Wuhan (center), which sparked global concern.
Chinese exchanges were supposed to open Friday. But Beijing imposed an additional three days as a deadline to better fight the epidemic.
Ten days ago, global stock market indices witnessed a sharp decline, fearing possible setbacks to the epidemic on the Chinese economy, the second in the world.
The emergence of the emerging Coronavirus has paralyzed entire sectors of the Chinese economy, as fearful residents preferred to stay at home.
As for restaurants and cinemas that are usually filled with holidays, they are deserted from the north to the south of the country. The Hubei Provincial Disease Prevention Center is cut off from the world.
Air transport and tourism are almost stalled and several companies announced that they will extend the suspension of their activities until after the New Year holiday, which ends on Sunday in principle.
Among them is the technology giant Taiwan’s Foxconn, which will keep its factories closed until mid-February.
Beijing is seeking to restore confidence.
“The impact of the epidemic is short-term and will not affect the trend in the long-term,” wrote the authority responsible for controlling the markets in an article published in the newspaper, the mouthpiece of the ruling Communist Party.
GDP is threatened –
The virus struck China as it fought a trade freedom initiated by US President Donald Trump. The growth of the Chinese economy fell last year to 6.1 percent, the lowest figure in nearly thirty years.
While consumption accounted for 3.5 percentage points of growth last year, Standard & Poor’s analysts warned that a slight 10 percent drop in household spending could lead to a 1.2 percent drop in gross domestic product over a year.
“The impact on Chinese growth may be significant in the short term,” the Oxford Economics office said, explaining that the growth rate “may drop to four percent in the first quarter” instead of the current 6 percent.
To avoid stock exchanges falling Monday morning, Beijing could order public investment funds to buy shares heavily.
Shares of the tourism and transportation sector could be affected, while health sector shares could rise, benefiting from the popularity of protective masks and other medical equipment.
The volume of exchanges may also be small on Monday morning due to the continued closure of some offices, even if the banks will reopen their doors initially.
On Saturday, the central bank announced a series of measures to encourage lending to companies that contribute to fighting the emerging Corona virus. He called on banks to allocate an “adequate level of accreditation” to hospitals and medical research centers.
On the other hand, Beijing announced the abolition of punitive customs duties imposed in the context of its trade war with the United States on some imported American medical products, to help curb the spread of the disease.
This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.
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