China Central Bank to inject $260bn into economy to soften coronavirus slump

  • China Central Bank to inject $260bn into economy to soften coronavirus slump

China Central Bank to inject $260bn into economy to soften coronavirus slump

Passengers, wearing masks, walk outside the railway station in Shanghai on Sunday. The virus has affected almost 12,000 people in China and the world over.

Prices of copper have fallen while those of gold have risen.

The epidemic has ballooned into a global health emergency with cases in more than 20 countries. This includes countries like Canada and regions as far off as Europe.

Before the people's Bank of China announced that it will bring to the markets liquidity in the amount of 1.2 trillion yuan (about us $173 billion) through reverse REPO open market.

The People's Bank of China (PBOC) said on its website that it was lowering the seven-day reverse repo rate to 2.40 per cent from 2.50 per cent, and cutting the 14-day tenor to 2.55 per cent from 2.65 per cent previously.

China's markets open on Monday for the first time after the Lunar New Year holiday was extended due to the virus.

The benchmark Shanghai Composite Index dived 8.73 per cent, or 259.83 points, to 2,716.70, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, sank 8.99 per cent, or 158.02 points, to 1,598.80.

China's securities regulator said the novel coronavirus outbreak has limited impact on China's stock market and the long-term trend of the market remains unchanged.

Night trading of futures will be suspended starting Monday until further notice, said the CSRC.

The PBOC would "release policy information in a timely manner and guide market expectations", he said.

Cities like Wuhan remain in virtual lockdown with travel severely restricted, and China is facing mounting worldwide isolation as well due to restrictions on flights to and from the country.

"Although most analysts agree it is too early to estimate the impact of (the virus) on the global economy, one thing I am increasingly more certain of is that the near-term shock to Chinese economy will be much higher than that in SARS period", said Tommy Xie, head of Greater China research at OCBC.

US Secretary of Commerce Wilbur Ross said last week that the virus could force companies to re-evaluate their supply chains, potentially returning some jobs to the United States.

The virus outbreak has cast a shadow over the initially upbeat start to 2020, as the USA and China signed a trade deal that eased a big source of uncertainty and raised hopes a global slowdown might have bottomed out.

Beijing also said it would help firms that produce vital goods resume work as soon as possible.

Chinese stocks collapsed Monday with hundreds of firms plunging by the maximum 10 percent as investors got their first chance in more than a week to react to a barrage of bad news from the spiralling coronavirus outbreak.

The central bank has also floated other support measures this weekend, aimed at bolstering the economy.