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With the coronavirus posing a greater threat to the economy, the outbreak left the top leadership with a decision to make, as the efforts in 2008 left the nation with a mountain of debt. Photo: Bloomberg

Explainer | What stimulus measures did China use to combat the economic impact of the coronavirus?

  • Faced with the unprecedented economic impact of the coronavirus outbreak, China rolled out numerous measures to aid the world’s second largest economy
  • In response to the global financial crisis in 2008, China implemented a massive 4 trillion yuan (US$564 billion) stimulus package

In response to the global financial crisis in 2008, China rolled out a massive 4 trillion yuan (US$564 billion) stimulus package.

When the coronavirus posed an even greater threat to the economy in 2020, the outbreak left the top leadership with a decision to make, as the efforts in 2008 also left the nation with a mountain of debt.

Before the outbreak, China had already cut the top tier of the value-added tax (VAT) rate to 13 per cent from 16 per cent in April 2019, after a one percentage point cut in 2018. It had also raised the personal income tax threshold by 1,500 yuan (US$211) to 5,000 yuan (US$705) in January 2019, while allowing more pre-tax deduction in terms of child care, elderly care, medical expenditure, mortgage interest rates and continued learning. The total tax cuts amounted to 2.3 trillion yuan (US$324 billion) in 2019.

These moves were largely in response to the trade war with the United States, which led China’s economy in 2019 to slow to a growth rate of 6.1 per cent, the slowest rate since political turmoil ravaged the country in 1990.
Here, we track China’s response to the coronavirus outbreak, which emerged just as those trade war tensions with the US appeared to have cooled with the signing of the phase one deal in January.

September 2, 2020 - China’s cabinet approves two new nuclear power plants 

China gave the green light to the construction of two new nuclear power plants after granting no new approvals for more than a year, as the country continued to follow its old playbook of increasing infrastructure investment to boost the economy and employment. 

June 24, 2020 - Premier offers help to commerce chambers, corporations 

Premier Li Keqiang tells the State Council that China will standardise corporate fees for commerce chambers and seek to further reduce overall corporate burdens. 

June 17, 2020 - State Council calls on banks to give up profits to finance cheap business lending

China's State Council called on banks to sacrifice 1.5 trillion yuan (US$212 billion) in profits in 2020 to finance cheap loans to companies as a way to offset the economic fallout from the coronavirus pandemic.

People's bank of China governor Yi Gang confirmed the move, which called on banks to sacrifice the equivalent of 78 per cent of their 2019 profits to help small businesses, was a de facto cut in interest rates.

June 9, 2020 - China retail group secures duty-free licence 

Wangfujing Group, one of China’s largest retail groups specialising in department stores, confirms it has received approval from the Ministry of Finance to sell duty-free goods.

June 4, 2020 - Harbour, port fee exemptions extended 

China's Ministry of Finance and Ministry of Transport confirm exemptions from harbour construction fees will be extended until the end of 2020.

June 1, 2020 - PBOC offers help for small businesses

China’s central bank said it will temporarily purchase loans made to small businesses from some local banks, in a bid to boost the supply of lending to the real economy.

The plan will use 400 billion yuan (US$56 billion) to buy 40 per cent of unsecured loans made to small and medium-sized firms with maturities of at least six months made between March 1 and December 31.

May 22, 2020 - National People’s Congress takes place in Beijing

China announced a raft of stimulus policies at the rescheduled National People’s Congress.

Beijing set a local special bond quota at 3.75 trillion yuan (US$527 billion), compared to 2.15 trillion yuan in 2019. It will issue 1 trillion yuan in special Treasury bonds, targeting a fiscal deficit ratio of 3.6 per cent, compared to 2.8 per cent last year. As the special Treasury bonds are not included in central government’s budget, they do not contribute to raising the deficit-to-gross domestic product (GDP) ratio.

It will continue to implement reductions of value added tax (VAT) rates and pension contributions for staff paid by companies. As part of a package that will also offer 2.5 trillion yuan in additional savings for firms, policies introduced earlier in 2020 that were due to expire at the end of June will all be extended until the end of the year. Services such as public transportation, restaurants and hotels, tourism and entertainment, and culture and sports will also be exempt from VAT, while civil aviation development fund contributions and port development fees will be reduced or cancelled. Corporate income taxes to be paid by micro and small businesses, as well as self-employed individuals, will be postponed to next year.

Low-income earners will be allowed to postpone the payment of their social insurance premiums, and all employment-related government charges will be cancelled.

The 5 per cent reduction in the price of electricity paid by companies will also be extended to the end of the year, while the rates for broadband and dedicated internet access services will be cut by 15 per cent on average. ​Rents for state-owned premises will be lowered or exempted, and all other types of property owners will be encouraged to also reduce, waive, or defer payments.

Large commercial banks were encouraged to increase inclusive finance lending to micro and small businesses by more than 40 per cent. 


May 14, 2020 – China requires greater budget support, finance minister says

Finance Minister Liu Kun says China will increase fiscal expenditure in 2020 to help offset the damage to the economy resulting from the coronavirus outbreak and ensure that the nation can reduce poverty and achieve its target of building up a comprehensively well-off society by the end of the year.

China also announces a decision to waive the value-added tax (VAT) and some fees on certain film-related businesses until the end of 2020.

April 29, 2020 – China announces National People’s Congress will resume on May 22

April 24, 2020 – PBOC cuts MLF rate

People’s Bank of China (PBOC) cuts its targeted medium-term lending facility (MLF) rate by 20 basis points to 2.95 per cent, injecting 56.1 billion yuan (US$7.9 billion) into the banking system.

April 21, 2020 – China extends welfare support to vast migrant labour force

China’s State Council announces a new package of welfare support to help vulnerable migrant workers.

Under the move, state-funded infrastructure projects will be able to use up to 15 per cent of investment for a project to pay wages in an effort to expand hiring. Previously only 10 per cent was earmarked for salaries.

The State Council also urges local authorities to provide unemployment benefits or “minimum living guarantees” to migrant workers, who had not previously been covered.

The reserve coverage ratio as required by Chinese regulators will also be reduced by 20 basis points, to unleash more funds for micro and small-enterprises. The previous reserve coverage ratio required of Chinese banks was between 120 per cent and 150 per cent, with the reduction meaning that some small and medium-sized banks could see this figure drop to as low as 100 per cent.

April 20, 2020 – China lowers loan prime rate

China lowers its one-year loan prime rate (LPR) by 20 basis points to 3.85 per cent, while the five-year LPR is cut by 10 basis points to 4.65 per cent.

April 17, 2020 – China's economy shrinks 6.8 per cent in first quarter

April 15, 2020 – China cuts MLF borrowing costs to record low

People’s Bank of China (PBOC) lowers the interest rate on its one-year medium-term lending facility (MLF) loans to financial institutions to 2.95 per cent, down 20 basis points from 3.15 per cent.

April 14, 2020 – Special purpose bonds for infrastructure projects

China’s State Council’s authorises a further 1 trillion yuan (US$140 billion) in local government special purpose bonds for infrastructure projects. It also doubles funding for old neighbourhood reconstruction programmes and extends the 15 per cent preferential income tax rate for some investments in western regions.

April 8, 2020 – Wuhan lockdown ends

April 7, 2020 – New pilot zones

China’s State Council’s executive meeting chaired by Premier Li Keqiang announces plans to build 46 new integrated pilot zones for cross-border e-commerce around the country.

The country will also extend some expired preferential tax policies to the end of 2023 to help small and micro-sized businesses, self-employed individuals and farmers. Under the policies, small and micro enterprises, as well as rural households, are exempted from the replacement of interest income on loans of 1 million yuan (US$141,000) and below.

April 3, 2020 – RRR cut to aid SMEs

People’s Bank of China (PBOC) announces reserve requirement ratio (RRR) cuts for rural banks and some city commercial banks totalling 100 basis points, which is expected to release around 400 billion yuan (US$57 billion) of funds into the banking system. The cuts of 50 basis points each time will be made on April 15 and May 15. After the cuts, the RRR for the country's small and medium-sized lenders will be slashed to 6 per cent.

March 31, 2020 – State Council rolls out host of measures

China’s State Council rolls out a host of measures to support the economy, including an additional central bank credit line of 1 trillion yuan (US$140 billion) to small lenders. The government also announces 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.

It also authorises a third batch of local government bond issuance this year to support “effective investments” in areas from affordable housing to motorways. The State Council did not elaborate on the size of the bond issuance – which follows previous batches worth 1 trillion yuan in November and 290 billion yuan (US$41 billion) in February – but urged local governments to sell them by the end of June.

Beijing will also extend subsidies and purchase tax exemptions for new energy vehicles like electric and hybrid cars until the end of 2022.

The central government will double the temporary monthly allowance for low-income families between March and June to counter price increases caused by the coronavirus outbreak.

March 30, 2020 – Reverse repo rate cut

People’s Bank of China (PBOC) lowers the seven-day reverse repurchase agreement rate (RRR) by 20 basis points to 2.2 per cent, injecting 50 billion yuan (US$7 billion) into the market. Before the move, China’s central bank had skipped reverse repos for 29 straight trading days.

March 27, 2020 – China responds to G20 pledge

China’s State Council says it is ready to raise its budget deficit above 3 per cent of gross domestic product (GDP) after the Group of 20 (G20) pledges a US$5 trillion economic rescue package.

March 26, 2020 – G20 leaders pledge US$5 trillion fiscal stimulus package

March 16, 2020 – Further RRR cut

People’s Bank of China (PBOC) pumps 550 billion yuan (US$78 billion) into its banking system to spur additional lending to factories and households by cutting banks' reserve requirement ratio (RRR) by 50 or 100 basis points, with the exact cut based on individual assessments.

March 14, 2020 – First city to distribute vouchers

Nanjing is the first Chinese city to grant 300 million yuan (US$42 million) of consumer vouchers aimed at improving spending.

March 11, 2020 – World Health Organisation (WHO) declares coronavirus a pandemic

March 3, 2020 – Harbour, port fees cut

China’s State Council cuts harbour construction fees and lowers other port related fees by 20 per cent from March to June. It also increases provincial governments' share of overall tax revenue by 5 percentage points, with an estimated 110 billion yuan (US$15.5 billion) allocated to county-level governments. Fiscal transfer payments from the central government are also accelerated .

February 25, 2020 – National People’s Congress formally postponed

February 25, 2020 – Help for small businesses, rural areas, farms, agriculture firms

China’s State Council approves an additional 500 billion yuan (US$70 billion) for small business lending on top of 300 billion yuan approved earlier in February. Certain small businesses will also be able to to postpone loan repayments.

To help spur borrowing, the official interest rate set by the central bank for commercial lenders extending credit to rural areas, farms and agriculture firms, as well as other small businesses, was cut by a quarter of a percentage point to 2.5 per cent. Regional banks that extend such loans at a rate no higher than a half percentage point above the benchmark loan prime rate (LPR) will also be eligible to apply for the new government funding.

The State Council also orders large state-owned banks to increase lending to small businesses by at least 30 per cent in the first half of 2020. China’s three government-run policy banks were also told to lend 350 billion yuan (US$50 billion) to small businesses at preferential rates.

February 22, 2020 – Cheaper electricity

China’s state planner, the National Development and Reform Commission (NDRC), lowers companies’ electricity price by 5 per cent from February 1 to June 30, except high energy consuming industries.

February 20, 2020 – Loan rate cut

The People’s Bank of China lowers the one-year loan prime rate (LPR) by 10 basis points to 4.05 per cent. The five-year LPR was also lowered by five basis points to 4.75 per cent.

February 18, 2020 – Pension fund contribution

China’s State Council allows businesses to reduce or even stop contributions to provincial pension funds as well as unemployment and work insurance from February to June. It also halves the social contribution rate for large corporations between February and April. Companies can also apply for the postponement of housing fund contributions before the end of June.

February 5, 2020 – VAT exemption, loan subsidies

China’s State Council exempts transport and virus control companies from value-added tax (VAT), creates subsidies for loans to pandemic control companies and suspends requirements for civil aviation companies to pay into the civil aviation development fund.

February 3, 2020 – Open market operations, reverse repo cut

On the first day the stock markets in Shanghai and Shenzhen reopened after the Lunar New Year holiday, the People’s Bank of China (PBOC) injects 1.2 trillion yuan (US$170 billion) of liquidity through reverse bond repurchase agreements. It also lowers the seven-day reverse repurchase agreement rate (RRR) by 10 basis points to 2.40 per cent from 2.50 per cent, while also cutting the 14-day tenor to 2.55 per cent from 2.65 per cent.

February 1, 2020 – Coronavirus-relief bonds

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) allows the sale of coronavirus-relief bonds by financial institutions.

January 30, 2020 – Help for front line medical staff, party members

The Organisation Department of the Communist Party of China allocates 108 million yuan (US$15 million) to help front line medical personnel, as well as grass roots-level Communist Party members.

January 27, 2020 – Hospital construction

China’s National Development and Reform Commission (NDRC) allocates 300 million yuan (US$42 million) to fund the construction of two temporary coronavirus hospitals in Wuhan.

January 23, 2020 – Wuhan lockdown begins

January 11, 2020 – China reports first coronavirus-related death

January 6, 2020 – Reserve ratio cut

People’s Bank of China (PBOC) cuts banks’ reserve ratio requirement (RRR) by 0.5 percentage points. The RRR – the money that banks are required to hold in reserve – for big banks is lowered to 12.5 per cent, while the ratio for small and medium-sized banks is reduced to 10.5 per cent and 7 per cent respectively.

December 31, 2019 – First report of a ‘mystery illness’ in Wuhan

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