Press Room

SCIO briefing on fiscal policies to control the novel coronavirus pneumonia (NCP) outbreak

China.org.cn | February 8, 2020

China Daily:

The central bank announced recently that it will allocate 300 billion yuan ($42.9 billion) in special refinancing loans. How will this be utilized and how can we ensure that the money will be used to support the prevention and control of the epidemic? Also, what is your take on the current financial market, especially the fluctuation and future trajectory of the stock and foreign exchange markets? Thank you.

Pan Gongsheng:

Mr. Yu has responded to your question from the perspective of finance. In order to win the battle against the epidemic, the PBOC has showed its responsibility in tackling this crisis. With the approval of the State Council, the PBOC decided to provide 300 billion yuan in special refinancing loans, which aims to offer preferential interest rates to major companies involved in the production, transportation and sale of medical supplies and daily necessities. These loans will be provided by state-owned commercial banks and local commercial banks in regions that are seriously affected by the outbreak. We will use a list-based management system, and the National Development and Reform Commission as well as the Ministry of Industry and Information Technology will identify the companies which will be put on this list. On the list currently are manufacturers involved in the production of key medical supplies and daily necessities, such as face masks, goggles, sanitizers and disinfectants. Based on this list, financial institutions will grant these special loans offered by the PBOC to the companies. We will ensure all the processes will be handled as fast as possible.

The cost of the special loans that the PBOC has provided to the commercial banks is pretty low. We required that the interest rate that commercial banks have offered to the companies on the list not be higher than 3.15%, which is one percentage point lower than the Loan Prime Rate (LPR) of last month. Looking at the current lending situation, the lending rates of the commercial banks are between 2.4% and 3.15%. Based on this, the Ministry of Finance will grant companies discounted interest subsidies at a rate of 50%. That is to say, a company's actual loan financing costs will not be higher than 1.6%. As this is a special policy, we need to ensure that the utilization of the loans is highly focused. The PBOC will work together with the Ministry of Finance, the National Development and Reform Commission and the Ministry of Industry and Information Technology to ensure that we put in place this list-based management system to ensure that the loans will be used for the prevention and control of the epidemic. At the same time, we have created electronic accounts to check on how the loans are being utilized. Also, we have ordered audit authorities to step up their follow-up monitoring efforts. 

On Feb. 3, China's financial markets, especially the stock and foreign exchange markets re-opened as scheduled, which shows the Chinese government's commitment to upholding market rules and reflects the confidence of the decision-makers. It also reflects that China's financial markets are becoming increasingly mature. On Feb. 3, China's A-shares and the exchange rate of the onshore Chinese yuan saw major adjustments, which was expected. After that, the Chinese stock market stabilized and rebounded; the exchange rate of the Chinese currency experienced a two-way small-scale fluctuation, and cross-border capital flows as well as the supply and demand of foreign exchange remained stable. Later this evening, the State Administration of Foreign Exchange will release the data on China's foreign exchange reserves in January, which also showed a steady rise. The financial markets are highly sensitive to risks, and such reactions will be reflected through rapid pricing. After experiencing a short-term fluctuation, the stock and exchange rate markets have returned to normal. We can see that the financial market, in its own special way, has expressed its confidence in the Chinese government's ability to control the epidemic and China's future economic growth. Just as I said earlier, the impact of the epidemic on the Chinese economy is just temporary and limited, and it will not change the fundamentals of China's positive long-term economic and high-quality growth prospects. Also, the Chinese economy has shown strong resilience. The Chinese government has ample policy tools to promote steady economic growth, so we have confidence in the continued steady operation of the Chinese stock and foreign exchange markets. Thank you. 

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