CHINA : FIRST SIGNS OF STIMULUS

Chart of the week

China was the first country affected by the Covid-19 epidemic and the first to implement lockdown. As February’s PMI data showed, the economic impact has been huge. Following an extended Chinese New Year break, restrictions have been gradually eased since mid-February, with lockdown being lifted on 25 March in the Hubei Province and on 8 April in Wuhan. This has led to a gradual recovery that is now visible in the PMI readings for the month of March.

To stimulate the economy, the Chinese government is relaxing lending conditions. Lending surged in March to reach 2.85 trillion yuan, the highest monthly figure ever seen, except sometimes in January when lending is traditionally very high due to Chinese New Year.

Our analysis

China’s central bank has taken several steps to increase bank lending, cutting reserve rate requirements and certain lending rates. Against a backdrop combining global economic slowdown and high demand for certain Chinese products such as masks and medical products, the central bank can be expected to pursue its current policy in the foreseeable future.

 

See also: China: has the economy bottomed-out?

 

The opinion expressed above is dated  10 April 2020, and liable to change.

 

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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée