Ever since the outbreak of COVID-19 in January this year, China has taken strong and effective measures to respond to the spread of the epidemic while keeping the social and economic life in order. The containment of the outbreak of the epidemic is the first and foremost priority for Chinese governments at all levels. So far, China’s responsiveness to the outbreak of the epidemic is widely recognized by the international community and the WHO. As economic and social life gradually normalizes in China, here is an update on the recent progress and the concerted efforts by Chinese governments in epidemic control and the policy priorities laid out for the next step.
2.Measures to balance epidemic control and economic and social revival
While putting the epidemic control as the first and foremost priority, Chinese governments at all levels has taken various measures to support the businesses in areas less hit by the virus to resume work and production in an orderly manner with rigorous precautions still in place to prevent further infections.
Preliminary positive results have been emerging from China’s containment measures. The central government has called on nationwide commitment and resources in a pragmatic and systemic approach unprecedented before to control the outbreak and treat the patients. Under concerted efforts, the rates of new infections and suspected cases are moderating across the country. Efforts are doubling down in Wuhan and other parts of Hubei Province to stop further spread of the virus.
Coordinated measures have been taking to support resumption of work and production with a balance between epidemic control and economic and social revival. At a meeting on February 23rd, President Xi stressed on unremitting efforts in combating COVID-19 epidemic and advancing economic and social development, laying out eight requirements on the orderly resumption of work and production, urging for supportive fiscal, monetary, foreign trade, and employment policies to that end. In the financial area, greater emphasis is put on the use of macro-economic policies and proactive fiscal policy, as well as more flexibility and moderation in prudent monetary policy. So far, these policy adjustments have been effective in getting more factories back to operation. Official statistics showed that, among industrial enterprises above designated size, more than 95% of plants have restarted except those in Hubei province, with more than 80% of employees have returned to work, and among those small and medium-sized enterprises (SMEs), more than 60% of plants have restarted. In the meantime, companies are also working with their trade partners to prioritize orders from leading enterprises who are of pivotal significance in global supply chain and key production links, so as to restore stability in supply and meet export demands.
3.Measures taken by financial regulators
Financial regulators in China have been jointly providing continuous financial support to the epidemic control and economic revival efforts. Ever since February. 1st, the People’s Bank of China (PBC), Ministry of Finance (MOF), China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSRC) and State Administration of Foreign Exchange (SAFE) have jointly announced 30 measures to be taken in the financial sector to help respond to the outbreak of COVID-19, including measures to keep liquidity at a reasonably ample level, apply favorable credit policies to small-and-micro-sized enterprises in the regions severely hit by the epidemic, extend support to the roll-overs or renewals of due loans for enterprises stuck in liquidity difficulty in such regions, maintain normal provision of financial services and safety of financial infrastructures via reasonable resources allocation, safeguard the stable operations of financial markets etc.
CSRC has also been taking various measures to strengthen the role of capital market in the battle against the virus, supporting real economy, and mitigating risks.
First, monitoring the market closely to safeguard market stability and improve systemic resilience. Special attentions have been paid to key risk areas like stock pledged loans, margin trading and short selling, and bond defaults. In the regions which are hard hit by the virus, measures were adopted to support market players to rollover the stock pledged agreement, to avoid mandatory liquidation for clients of margin trading and short selling and to offer certain extension for clients to pay in additional margin deposit. Such measures can reduce the liquidity pressure faced by some enterprises and individuals due to the Covid-19 and help ensure market stability.
Second, offering financing incentives to companies from worse-hit region and to those contributing to epidemic control. For example, regarding IPO, refinancing, bond issuance and M&A, fast track review or registration will be provided to companies registered or based in Hubei Province, enterprises playing a key role in the fight against the virus, or if the financing purpose is to prevent and control the epidemic. Refinancing rules has also been revised to be more market-oriented and supportive of the real economy.
Third, guiding more social funds to manufacturers of important medical supplies and related R&D companies, by providing fast track to the registration of private equity funds and venture capital targeted at the medical and healthcare industries.
Fourth, urging securities and fund management institutions to strengthen capital strength and provide quality financial services for enterprises in the worse-hit areas.
Fifth, calling on listed companies, securities and futures companies to assume their social responsibilities in supporting medical R&D, supply logistics and delivery, and the construction and preparation of designated hospitals.
4.The impact of the epidemic on China’s capital markets and what the CSRC has done
Since its reopen on February 3rd, China’s stock market suffered a short and severe shock, yet withstood the impact of the COVID-19 outbreak with greater resilience, and is now steering back to the normal course of operation.
Recognizing that maintaining capital markets stability throughout the outbreak of the epidemic is the common concern of both domestic and overseas investors, the CSRC has stepped up its supervision over and guidance to the exchanges and relevant services providers, requiring them to guarantee smooth operation of the markets and contributing to epidemic control efforts.
To ensure the reliability of market infrastructure, the CSRC has asked the exchanges and China Securities Depository and Clearing Limited (CSDC) to resume services on time, improve business continuity plans, encourage market participants to access online services, and make sure issuance, trading, clearing settlement activities are proceeded in an orderly fashion.
To support epidemic control and protect investors’ health, the CSRC requires financial intermediaries to pay special attention to the sanitation and sterilization of business premises, and encourage investors to use off-site and on-line service channels.
To make flexible arrangements for relevant regulatory requirements including information disclosure, the CSRC is deliberating on measures to allow postponed periodic reporting by more than 60 listed companies in Hubei Province, and to extend relevant deadlines etc.
To enhance investor services and protection, the CSRC has been holding open channels for investor complaints, urge the financial institutions to maintain up-to-the-standard services, help investors form rational and objective assessment of the epidemic and its impact, and continue to encourage long-term and value investments.
5.Prospects for the capital markets of China
We have strong confidence that China’s capital markets will remain stable, and we expect the fallout of the COVID-19 outbreak on China’s economy and financial markets to be only temporary.
First, as China continues to enhance control measures against the virus, both the outbreak and its negative economic impact of the epidemic will be controllable.
Second, the fundamentals of China’s macro-economy remain upbeat, making the A-share market one of the most attractive destinations for global investment.
Third, recent policies to deepen reform and opening-up of China’s capital market will have continued effect in promoting sound market development for the long run. In face of the outbreak of the epidemic, the CSRC will work with all market participants to maintain market order and ensure investor protection through concerted efforts.
Fourth, even if short-term readjustment and volatility is expected in the short run, it will not change the long-term trend of market growth and development. After effective measures were taken to contain the epidemic, social and economic lives is now gradually returning to normal track.
6.The CSRC’s call for global cooperation and coordination for fighting against COVID-19 with common efforts to maintain sound and steady development of global capital markets
While the epidemic outbreak in China has been largely put under control, unfortunately, recent days has witnessed the severe outbreak of the COVID-19 outside China. Meanwhile, the world oil price also crashed due to the disputes among the major oil producers and the failure of dialogues between OPEC and non-OPEC countries. Under this stressful circumstances, the global capital markets experienced unprecedented volatility recently with major stock indices across the world plummeted by the fear of further health risks and economy downturn.
Hence, the CSRC would like to call for common efforts, as well as closer cooperation and coordination among all securities and futures regulators around the world to fight against further outbreak of the COVID-19, and join hands together to safeguard the sound and steady development of the global capital markets:
At present, it is the utmost priority for all countries around the world to carry out closer cooperation and coordination in fighting against the COVID-19, while ensuring the world supply chain, the medical supply logistics and delivery in particular, would not be disrupted, and minimizing the impacts by controlling measures imposed against the virus.
The composition of macro-and-micro economic policies, fiscal policies and monetary policies is keenly needed across all countries. Therefore, we would suggest major international organizations such as G20 to make joint efforts to address the current risks and coordinate their actions. As far as the global financial markets are concerned, the international organizations such as IMF, WB, FSB and IOSCO shall play the key and crucial role in coordinating policies and safeguarding the soundness and stability of the global financial markets.
As far as the global capital markets and securities regulators are concerned, we call for an enhanced mutual and multilateral cooperation and coordination among all regulators in such areas as concerted guidance on information disclosures of cross-border issuers, cross-border supervisory and regulatory collaboration and enforcement cooperation in fighting against fraudulence, misrepresentation, market manipulation and inside trading, etc.