China preps new coronavirus stimulus measures, but some ask are they bold enough to work?

China’s State Council has authorised new bonds to fund infrastructure, additional subsidies and tax breaks for the car industry, and cheap loans for small businesses

Focusing on investment may ‘leave uncompleted projects’ and the government should concentrate on jobs and livelihoods, analysts say

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The Chinese government has maintained a softly-softly approach when it comes to supporting its coronavirus-hit economy. Photo: AP

Published: 7:32pm, 1 Apr 2020Updated: 11:05pm, 1 Apr 2020

China has rolled out new measures to support its economy from the coronavirus pandemic, including an additional central bank credit line of 1 trillion yuan (US$140 billion) to small lenders.

The initiatives announced at a cabinet meeting on Tuesday ranged from new bond quotas for local authorities to income support for poor Chinese.

The government also announced new monetary policies, including the prospect of lower deposit reserve requirements for small banks in the future and an additional 1 trillion yuan for small banks to spur lending to small businesses.

The moves came after the Politburo, China’s 25-member central decision-making body, decided last week to increase the federal government’s budget deficit ratio, issue more local bonds and sell special Treasury bonds to prop up the world’s second largest economy.

While the United States and the European Union have gone for all-in stimulus measures, including providing handouts to households and individuals, Beijing has opted to pump money into banks and local government coffers in the hope it will trickle down to small businesses and residents.

Support has so far stopped well short of the massive 4 trillion yuan (US$564 billion) stimulus China announced in 2008 in response to the global financial crisis.

“The policy support has stepped up, obviously,” said Ding Shauang, chief Greater China economist of Standard Chartered Bank in Hong Kong. “However, it can’t be compared to the stimulus size in Europe and the United States.