Seoul is the worst hit down 8.39%. Shanghai and Shenzhen limit damage. Fears of an imminent recession. The stimuli are useless if people cannot work and spend. Chinese economists divided over the need for a major economic aid program.
Beijing (AsiaNews / Agencies) - Asian stock markets continue to lose ground in the wake of the free fall of Wall Street and European indices. Seoul is the worst hit, registering losses of 8.39%. Mumbai (-3.08%), Tokyo (-1.04%), Taipei (-5.83%) and Hong Kong (-2.21) were also badly affected. By mid-afternoon, Shanghai and Shenzhen had limited damage, with losses of 0.98% and 0.10% respectively.
The markets are not responding to the mass injections of liquidity operated by the central banks of the major world economies. Fears of an imminent recession linked to the spread of coronavirus are paralyzing investors, who are waiting for the next move of the big players (USA, China, Japan and the European Union) to protect and stimulate the real economy.
Many observers believe that stimulus measures can do little to boost confidence: people are forced to stay indoors, they cannot go to work and they spend money.
After an initial financial stimulus of over 1000 billion yuan (130 billion euros), Beijing appears to be in no hurry to launch a vast spending and investment program - which has only been announced in vague terms by President Xi Jinping. Chinese leaders do not want to make the same mistake as in 2008 when they launched an aid package worth 4000 billion yuan (520 billion euros) to fight the mortgage crisis in the US, racketing up their debt and creating massive problems for the national banking sector.
Chinese Academy of Sciences economist Yu Yongding, economist argues that before launching a spending program, the government must definitively defeat the epidemic and encourage a return to production in all factories. The unemployment rate in the country jumped from 5.2% in December to 6.2% in the first two months of 2020.
Wu Xiaoling, the former deputy governor of the Chinese Central Bank (PBOC), does not agree. He says the government must increase tax spending to a deficit of 3.5% (in 2019 it was 3%). Moreover, he suggests the PBOC place new bonds of 1,000 billion yuan on the market to finance infrastructure and support growth costs.