Coronavirus: Chinese stock exchanges recover, but industrial production is struggling to recover
Shanghai and Shenzhen continue to recover after a new interest rate cut decided by the central bank. However, factories are struggling to resume activities due to the lack of manpower and movement restrictions. Liquidity injections are likely to do little to help small and medium-sized businesses.
Beijing (AsiaNews / Agencies) - Chinese markets rose sharply in the mid-afternoon after the decision of the Central Bank (PBOC) to cut interest rates on short and long-term loans. Shanghai records a 1.84% increase, and Shenzhen also does better with a 2.15% gain.
In recent days, the PBOC had already intervened with a drop in medium-term rates to stimulate the recovery of the economy in China, affected by the impact of the Wuhan coronavirus (Covid-19), but the recovery in the financial markets is not yet accompanied by an improvement in production. Called by the government to accelerate the recovery of activities, Chinese companies are struggling to cope with the lack of manpower and the interruption of logistics links in a large part of the national territory.
The preventive measures adopted by the authorities to combat the spread of the epidemic, in particular the restrictions on movements, have depressed domestic demand, while that from abroad is greatly reduced. The industrial provinces of the east of the country, and the companies themselves, try to compensate for the shortage of human resources by organizing special transport services to bring migrant workers, stuck in their rural areas of residence for almost a month, to the factories. Out of a total of 300 million, only a third of them resumed work, according to data from national agencies.
To support the economy, a group of Chinese experts proposes to increase public spending up to an annual deficit of 3.5% (thus exceeding the psychological threshold of 3%). In this sense, the PBOC should continue to inject liquidity into the system, issuing bonds for 1000 billion yuan (132 billion euros). However, the effectiveness of these growth measures may be limited. The biggest problem is that Chinese small and medium-sized enterprises - the hardest hit by the epidemic crisis - have chronic difficulties in accessing loans with favorable interest rates, which will limit their ability to react to the crisis.