Economists believe the coronavirus will hurt the global economy in 2020. Goldman Sachs predicts it could knock Chinese growth down to 5.5% for the year, from 6.1% in 2019.

By Ian Horswill

Posted on February 3, 2020

China’s central bank, the People’s Bank of China, has pledged to pump 1.2 trillion yuan (US$173.8 billion) into its financial system in an attempt to protect its economy from the coronavirus epidemic as the first death outside China from the virus is reported.

The action came as China’s expert tackling the coronavirus, Zhong Nanshan, said the outbreak may reach its peak in the next 10 to 14 days, China Daily reported.

The People’s Bank of China announced it would try to ensure a stable currency and “reasonable and abundant liquidity” in the banking system as the country prepares to reopen its stock markets after an extended Lunar New Year holiday on Monday (local time), Reuters reported.

Under a “reverse repo” scheme, the People’s Bank of China will purchase a range of securities from investors seeking ready cash to avoid a wave of forced selling.

The action by the People’s Bank of China will allow just over 1 trillion yuan of existing reverse repo contracts that expire on Monday to be rolled over, plus an extra 150 billion yuan of extra support.

The People’s Bank of China also announced more monetary and credit support for hospitals and medical institutions at the frontline of the battle against the coronavirus, which originated in Wuhan in Hubei province, whilst urging financial institutions to provide “sufficient credit resources” to hospitals and medical research units.


Economists believe the virus will hurt the global economy in 2020. Goldman Sachs predicts it could knock Chinese growth down to 5.5% for the year, from 6.1% in 2019. Hong Kong’s Hang Seng index lost 6% last week when it reopened after the new year break. Britain’s FTSE 100 dropped 4% during the week, hitting a seven-week low.

The Shanghai and Shenzhen stock exchanges are expected to be hit when they reopen. They have been shut for the holidays since 23 January, when the coronavirus crisis was intensifying.

Stephen Innes, chief market strategist at AxiCorp, said the PBoC’s liquidity injection went “well beyond a Band-Aid fix”, The Guardian reported. Chinese investors could still “hit the panic button out of the gates”, he feared, given the scale of the crisis and China’s position as the second largest economy in the world.

“The markets continue to view the Wuhan virus through the lens of the Sars epidemic of 2002-03. Still, given the importance of China in the global supply chain in 2020 versus 2003, the risk might be that the market is not alarmist enough,” Innes added.


More than 360 people have died from coronavirus with about 14,300 confirmed cases of the untreatable virus. The Philippines announced the first reported death from coronavirus outside mainland China. A 44-year-old Chinese man who had flown into Manila from Wuhan, which is basically locked down. A 1,000-bed hospital, Huoshenshan Hospital, in Wuhan will begin receiving highly contagious coronavirus patients on Monday, less than 10 days after construction began. A second new hospital, Leishenshan Hospital, is expected to finished on Wednesday.

On Friday, the US announced an entry ban on foreign nationals who have visited China in the past two weeks, as countries around the globe evacuate their citizens from Wuhan. More than 20 countries outside of China have coronavirus cases.