In the Face of turmoil, China injected billions into its economy



BEIJING | support to the economy, but sparingly: China has unsheathed Friday a series of measures to boost activity, but without venturing to show a growth target.


The country, first to be affected by the new coronavirus, has largely curbed the epidemic on its territory, but the consequences of the virus on its economy, are bound to last and remain largely unpredictable.


Even at the opening of the annual session of Parliament, chinese prime minister Li Keqiang has waived this year to set a goal of growth, breaking with an old tradition of the communist regime.


“Our country will be confronted to some factors which are difficult to predict” due to the pandemic of COVID-19 that is gripping the planet and leads the global economy, has justified Mr. Li in a speech of about an hour in the solemn framework of the Palace of the people in Beijing.


The power of china “is cautious about the future”, because he “thinks that the recovery will be slow and uncertain,” says Song Houze, the reflection group, MacroPolo, specializing in the chinese economy.


The country “faces unprecedented challenges in its development, and they will last for some time yet,” said the prime minister.


The crisis of the new coronavirus in addition to threats of new surtaxes, customs of the american president Donald Trump who wants to make “pay” Beijing to have, according to him, hidden from the beginning of the epidemic.


For the first time in its history, the chinese economy stalled in the first quarter (-6,8 %) under the effect of the virus that has virtually shut down the activity of the country.


Growth rates had already fallen last year to 6.1 %, its worst performance in nearly 30 years, at a time when the trade war with Washington intensified.


Billion to the shovel


If the activity is gradually picking up, companies are struggling to fill their order books, at a time when their major clients, in Europe and in North America, are paralyzed by the virus, and where domestic consumption is low and grey.


To support an economy struggling, the State will let go its deficit this year to 3.6 % of GDP (compared to 2.8 % last year). It will increase to 1 000 billion yuan (196 billion dollars), said Mr Li.


“If the situation (economic) is really very bad, China could increase its budget deficit”, writes the analyst Tommy Xie, bank OCBC.


This week, the Global Times, the English-language daily considered close to the government were talking about a deficit which may reach 8 % of GDP.


The prime minister also announced the issuance of “Corona ” hop”, a government loan of 1 000 billion yuan in response to the epidemic.


These 2 000 billion yuan in total (393 $ billion), will support jobs and will be geared to local communities.


These last are urged to “tighten the belt” and to give priority to the employment, at a time when the unemployment rate reaches 6 %.


“Finance unnecessary things”


The absolute record date of February (6.2 per cent) but this figure does not reflect the situation in urban area, and excludes de facto the millions of migrant workers, weakened by the pandemic.


The chinese officials are “extremely concerned” by the impact of the virus on the job, notes Michael Pettis, a professor of economics attached to the prestigious Tsinghua University in Beijing.


This is why Beijing is ready to “finance useless things”, such as infrastructures, redundant or apartments which remain empty, “to prevent unemployment to increase,” said Mr. Pettis.


This is the scenario that the power was withheld during the financial crisis of 2008-9, injecting without counting the 4,000 billion yuan (786 billion $) in the economy.


This result has been to inflate the debt, undermine local government and lead to overcapacity.


Another announcement of the prime minister: a large investment plan in infrastructure, “future”, which is supposed to accompany the upscaling of the economy.


In the amount of 3,750 billion yuan (737 billion $), it must in turn support consumption through the deployment of the technology for 5G, which is called to revolutionize communications, and generalize the vehicles to new energy.


Beijing had already announced in march a two year extension of the tax exemption for purchase of clean vehicles, in order to revive a automobile sector, which employs about 5.5 million people.



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