A man with a face mask is riding a bicycle, as the country is hit by a breach of the novel coronavirus, in Beijing, China February 12, 2020.
Carlos Garcia | Reuters
BEIJING – China is extending support measures for the country’s smallest industries, a sign that a full economic recovery from the pandemic of coronavirus infection is still facing much uncertainty.
The central government has announced a slew of policies at the height of the revolution at home to support the economy, especially loans for smaller, private businesses. These unions contribute to the majority of growth and jobs in China, but they often find it more difficult than state-owned enterprises to obtain loans from banks, which are largely owned by the state as well.
China’s main regulatory body, the Council of State, announced late Tuesday that small and medium-sized enterprises may postpone loan repayments over the first quarter of next year as needed. Banks that lend to these small businesses with government assistance for 40% of these loans can now maintain that support beyond the end of this year as appropriate, according to a government statement.
“Right now the economy is returning to normal, but more support is still needed (provided) there are unprecedented challenges in the production and operation of small and medium enterprises,” the statement said, according to -NBC translation of the Chinese text. Authorities noted that previous policies had helped more than 3.1 million small businesses.
The fact that the government needs to implement these policies shows that challenges remain within the economy, said Nicholas Zhu, vice president and senior credit officer at Moody’s Investment Service.
After Covid-19 appeared at the end of last year in the Chinese city of Wuhan, authorities shut down more than half of the country in February in a bid to control the uprising. GDP contracted by 6.8% in the first quarter, before returning to growth in the second quarter.
China’s gross domestic product grew 0.7% for the first three quarters of the year, pushing the country by distance to become the only major economy to expand this year after the pandemic.
The official urban unemployment rate, although highly questioned, fell to 5.2% in November, according to the same period a year ago.
This year, China has not experienced major bankruptcy and most people have remained working, reveals Liu Xiangdong, deputy director of the economic research department at the China Center for International Economic Exchange .
“But for small, medium and medium-sized enterprises, there is still uncertainty. If the economy turns, they will not be able to sustain,” Liu said, according to CNBC’s translation of his comments in language. Mandarin.
He noted that the smallest industries are in the services industry, which took longer to overcome the pandemic.
Sporadic issues in various cities since a wider halt of the domestic uprising in March have prompted a major test or periodic update on restrictions on business activity, mostly related to consumers and services. Many people spend less amid uncertainty about income. At the end of November, retail sales were still down 4.8% from a year ago.
More risks for Chinese banks
The question, analysts said, is when authorities should withdraw economic support appropriately, especially given the continued spread of the coronavirus in the US, UK and Europe.
Last week, at an annual meeting to determine the development priorities for the coming year, Chinese leaders were generally optimistic, while noting that the economic recovery was not entirely complete. , and that there would be no sudden change in support.
Government policy this year has helped, though not significantly, Zhu said. Most small businesses have not taken advantage of canceled repayment policies, he said, citing Moody’s talks with banks.
However, greater involvement with smaller businesses, usually more risky, means that Moody’s has a negative view of Chinese banks, with the risk of money laundering and the high rate of bad loans, or new non-performance.