Coronavirus: China likely to introduce new measures to bolster economy, analysts say

Analysts have cut their forecasts for China’s first quarter gross domestic product (GDP) growth to a contraction of up to 6 per cent

The change in sentiment came after the release by the National Bureau of Statistics (NBS) of the official manufacturing purchasing managers’ index (PMI)

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China’s economy has been hard hit by the coronavirus outbreak. Photo: AP

Published: 5:18pm, 1 Mar 2020Updated: 10:36am, 2 Mar 2020

China is expected to launch new policies to support economic growth, observers say, after figures showed the coronavirus outbreak hammered activity in the nation’s manufacturing and services sectors in February.

Analysts have cut their forecasts for China’s first quarter gross domestic product (GDP) growth from a consensus of about 4 per cent to a contraction of up to 6 per cent following the publication of the data on Saturday.

But most said the government would continue to shy away from redeploying the massive stimulus measures it used in response to the global financial crisis of 2008-09, which left local governments with massive debts from which they are still trying to recover.

The change in sentiment came after the release by the National Bureau of Statistics (NBS) of the official manufacturing purchasing managers’ index (PMI), which fell to an all-time low of 35.7, from 50 in January. The previous low was 38.8, which was reported in November 2008.

China’s non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – also plunged to an all-time low of 29.6, from 54.1 a month earlier. Readings below 50 represent a contraction in activity within a sector.

ANZ analysts said in a note that until now, “the government has targeted aid to affected sectors and enterprises, rather than using stimulus. Given the reluctant policy response, China is unlikely to repeat the post-global financial crisis scenario when the authorities unloaded a 4 trillion yuan (US$573 billion) stimulus package”.

The analysts estimated a 2 per cent contraction in China’s first quarter growth.

Despite the poor data, a large-scale stimulus plan might not be on the immediate horizon because there are other ways for China to cushion the impact on the economy from the coronavirus, analysts said.