China, almost overcome the coronavirus pandemic, has started the process to return to normality, but little by little, with the opening of Wuhan and an increase in its manufacturing processes.
It has been more than two and a half months since China closed in to contain the effects of the coronavirus and implemented a total closure. All of these measures paid off in the middle of last month.
China's challenge is to avoid massive bankruptcy of its companies
The great challenge of the Asian giant is to put in place measures to revive its economy and avoid the devastating effects that the coronavirus has had. Not only for the months that they have suffered from the coronavirus within their country, but also for the months that they have left due to the effects that the coronavirus will have on their main external clients.
The objectives that China has set to limit the economic effects, in the short term, are:
Support Chinese companies to avoid bankruptcies and defaults and thus ensure that there is no further financial instability.
- Make up for the losses that have been caused by the coronavirus in Chinese companies and families.
- Stimulate economic activity to achieve a faster recovery.
- China floods its economy with liquidity
The good that Chinese stocks are responding and investors are giving their support, although the CSI 300 has fallen, it has done less so than the stocks in Europe and the United States.
The Chinese Government has launched a package of economic and fiscal measures of more than 322 billion euros to encourage public investment, increase spending in the health sector, and eliminate or reduce the tax burden to increase investment and consumption.
On the other hand, the Government of China has thought about reducing the weight of the payments to its Social Security that employers must pay for employees they have hired.
In terms of montería policy, the Government of China has injected liquidity in the short term, has reduced the ratios that force to have financial institutions in their banks, has launched packages to refinance and give loans to companies worth 137 billion euros.
The Chinese Government has given explicit orders to financial institutions to provide financial support, they have given the flexibility to the management of credit risks, to the issuance of bonds and sale of shares locally, all of this aimed at Chinese companies.
China reserves its most powerful weapons for what is to come
China prefers to wait and leave its best weapons to face the negative effects on the Chinese economy, as it has so far injected billions of euros in a hurry to sustain an activity quite affected by the coronavirus.
As you can see, China has taken out the liquidity weapon to avoid a drop in consumption, and industrial paralysis, and the country's public debts, together with the debts of the banking entities, causing even worse effects for China.
The coronavirus had kept China's economy dormant for months when millions of its citizens locked themselves in their homes before the Government's control and isolation measures.
The great problem that these measures affect in a very negative way the production of its factories and the operation of companies, which has managed to reduce the Gross Domestic Product (GDP) by more than 1 percent.
The coronavirus has achieved what the United States has not achieved, that China lives a process of industrial regression, which has reduced its exports and the demand for imports, affecting world trade.
Right now, China is starting to start the process of activating its activities in an escalated way, but the consequences on the Chinese economy, within many other countries, are going to be long-term. This causes the Chinese Government to be forced to flood its liquidity economy to sustain it in the long term.
The Chinese Government has refused to carry out a revival plan and has proposed specific measures since they think that the stimulus policy should be reserved for when the economy improves.
However, this stimulus policy will focus on liquidity packages, flexible loans, cuts in interest rates, bailouts for the most affected companies, and temporary subsidies to reactivate the labor market in China.
The Government's focus is to avoid the bankruptcy of Chinese companies so that unemployment does not increase exponentially since March unemployment reached levels never seen in China, that is, 6.2 percent due to the coronavirus.
Very valueable information, i read every part of your article, you should see my also, to increase your valueable knowledge...
You must be logged in to post a comment.