MNI POLICY: China Should Sell Special Virus Bonds: Advisor

     BEIJING (MNI) - China should issue around CNY1-1.5 trillion in special

government bonds as soon as possible to boost credit and help fight the fallout

from coronavirus, Zhang Bin, a senior fellow at China Finance 40 Forum, a

prominent government-sponsored think tank, told reporters Monday. 

     Beijing should also beware of a possible sharp decline of credit, rising

local government deficits and the spread of the virus beyond its borders, Zhang

noted in a separate quarterly report for CF40.

     Here are main takeaways from the report:

     - Q1 GDP growth may slow to 3% should the situation be contained as of the

end of March. It will be difficult to achieve full-year 6% growth, which many

had projected to be this year's goal before the outbreak, given weak demand,

slowing property investment and sluggish infrastructure financing.

     - Special government bonds with lower costs and longer maturities can be

the key to boosting social credit and filling fiscal gaps. Rising local

government deficits could trigger new financial risks, delay fiscal spending,

hinder measures battling the epidemic and slow resumption of investment

projects.

     - Fiscal policies should play the main role by giving tax breaks, waiving

rental costs and postponing levies on firms for social security contributions,

while monetary policies should play a moderate role and focus on providing

liquidity and preventing shocks to credit. 

     - Restrictions on credit for property developers and mortgages should be

lifted, as the decline of real estate sales, together with the weakness in

infrastructure-related credit, can generate sharp declines in social credit.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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