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Coronavirus

China bolsters stimulus with annual congress delayed by outbreak

Policy vacuum looms over 2020 growth target and regional coffers

A car seat factory in Shanghai: China is eager to keep its economy humming despite the delay in its annual parliamentary session.   © Reuters

BEIJING -- With China postponing its nearly 3,000-member parliamentary session amid coronavirus fears, the central government is preparing additional stimulus measures to minimize the outbreak's economic blow and ensure that regional authorities can continue their response efforts.

Much of the country's political and business moves are steered by the road map indicated at the annual National People's Congress gathering. The vacuum left by a delayed session could pose serious challenges in containing the virus, which could prove a race against time.

"By actively expanding domestic effective demand and ramping up policy measures to counter the impacts, the country is capable of fulfilling all the goals of economic and social development for 2020," said Cong Liang, secretary-general of the National Development and Reform Commission, in a press conference Monday. The impact of the virus outbreak will be only temporary, Cong stressed.

The premier announces China's target growth rate for the year at the NPC event, which usually begins March 5. The 2020 target was set at around 6% at an economic planning meeting late last year. But now, the outbreak has raised questions as to whether Beijing will stick to this figure.

"The final target will likely be softer and more flexible," said a government source, who explained that there is a push to revise it to a range between 5.5% and 6%.

As many offices close down for the extended Lunar New Year holiday in January and February, regional governments and businesses look to the NPC to get back into full gear. Moving the national goalposts for growth would force regional governments to reevaluate strategies, leading to further delays in economic measures.

Various government agencies are unveiling emergency measures to shield the economy from further blows in the meantime. Assistant Finance Minister Ou Wenhan announced Monday that the government will issue more bonds for infrastructure construction and accelerate the debate on temporary tax breaks.

Stepped-up financial resources to regional governments will ensure that there is no impact on staff pay and other issues, Ou said. Chinese authorities had spent 99.5 billion yuan ($14.2 billion) as of Sunday on measures to combat the virus's spread, with three-quarters coming from regional coffers, even as the outbreak squeezes tax revenue.

The People's Bank of China is extending a helping hand to the country's lenders. The reserve requirement ratio will soon be lowered on banks that increase lending to small and midsize businesses, Deputy Gov. Chen Yulu has said.

The central bank usually grants a similar break in January or February. About 500 billion yuan of liquidity could be injected this time around, according to projections by Tianfeng Securities.

Regional governments are also allowed to issue up to 60% of their bonds for the year before receiving the green light from the NPC, thanks to a change in late 2018. The total approved issuance for 2019 was 3.08 trillion yuan, meaning that they can issue up to 1.85 trillion yuan without parliamentary approval.

Still, regional governments issued 785 billion yuan in bonds this January. If the NPC is delayed for an extended period, they could hit the cap and face severe financial constraints.

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