In the first quarter alone, China’s central bank injected more than 2 trillion yuan (US$283 billion) into the interbank market as well as providing an additional 1.8 trillion yuan to banks to spur new lending, while trimming corporate taxes and social security contributions by hundreds of billions of yuan. But the government relief efforts so far have simply not been enough, or been properly targeted, some analysts said.

“The primary task is to kick-start economic operations and help as many companies as possible survive … but the current [government] countermeasures are relatively rigid and insufficient,” said Liu Shengjun, head of the Shanghai-based research firm, the China Financial Reform Institute.

A majority of the government’s rescue efforts have been conducted through the state-dominated banking system and state enterprises, in a sharp contrast to cash handout schemes unveiled in the United States, Japan, Hong Kong, and most recently South Korea.

Funding allocation through state-owned banks is not an efficient way to funnel money to small businesses facing the biggest cash crunches, Liu said, noting these businesses account for 80 per cent of urban jobs.

Such economic relief measures are a result of decades-old thinking and the fear of a large increase in the central government’s budget deficit, Liu said.

“Given the unprecedented pandemic, [the government] needs to think outside the box to help small businesses and households,” he added. “Currently, many households and small business owners rely on their savings. What if the pandemic impact lasts longer than expected? It could result in bigger [economic] pain in the long run.”

Tang Dajie, a researcher with the Beijing-based China Enterprise Institute, said government resources should flow to the 80 million self-employed businesspeople who have been hit hardest by the economic impact of the pandemic, rather than state-owned firms and large companies which are better equipped to weather the storm.

While a majority of Chinese restaurants and other service firms have already reopened since the end of the various lockdowns, their revenues have fallen as many consumers have stayed away amid lingering concerns over virus infections, as well as not wanting to spend money due to worries about their jobs and future incomes.

A growing number of Chinese economists have also joined the call for the government to implement a direct cash handout.

Yao Yang, dean of Peking University’s national school of development, renewed the appeal on Thursday that the government should give each Chinese citizen 1,000 yuan (US$141) in cash, which could be funded by the issuance of 1.4 trillion yuan (US$198 billion) worth of special treasury bonds.

“[The government] should provide wage subsidies for small businesses which promise not to lay off workers. The size can be a certain proportion of their previous year average wages, like 40 per cent,” he said in an article published in the state-backed Public Finance Research this week.

Houze Song, a research fellow of the Paulson Institute, said Beijing has realised that it will not be able to prevent all private firms from financial deterioration, given the massive number of companies affected and the due diligence work needed to “separate the wheat from the chaff”.

“Only about one-third of these businesses have received modest credit support so far,” Song estimated in a research note.

“[The government] will likely rely more on policies that will cushion the impact from an ailing private sector, particularly on the unemployment front. A modest improvement in benefits coverage should not be very costly and would be politically popular with the Chinese public.”