China is going to do more to support the economy now that the new coronavirus is hitting it. That is what the leadership of the Communist Party and China’s central bank have said in recent days.
At the same time, millions of Chinese companies are in the water because of the approach to the virus.
The Chinese leaders indicated that they would use taxes to support companies and to be prepared to pump money into the economy in other ways. At the same time, the Chinese central bank says it is giving individual banks a discount for borrowing money so that they can provide cheap loans to companies.
The People’s Bank of China also stated that companies may not be able to pay off their bond loans, but that the risks are limited.
Many companies are worried about this. If they cannot pay off their loans, the creditors can apply for bankruptcy. Analysts think that millions of companies can get into trouble that way if the outbreak of the virus after the first quarter is not yet under control.
Besides, many companies were already suffering from the trade war with the United States last year, making their situation extra precarious.