How the coronavirus is good news for stocks

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ประเทศไทย ข่าว ข่าว

Under cover of coronavirus, China is changing former bad financial decisions, writes Shuli Ren

07 February 2020 - 11:31A Chinese man getting off a train as he and others return from the Spring Festival holiday on January 31 2020 in Beijing, China. Picture: GETTY IMAGES/KEVIN FRAYER

The most obvious explanation? This epidemic is giving policymakers the opportunity to correct past mistakes without looking silly. Recall 2018, when China staged one of the world’s worst routs. The selloff began well before the trade war as investors braced for record corporate defaults, even in the new-economy, electronics-manufacturing and technology sectors.

This all happened because in late 2017, China declared war on shadow banking, the main channel of credit for private businesses. The following April, Beijing unveiled far-reaching rules for its banks, requiring them to stick to traditional loan books and ditch creative wealth-management products that had aided the cash-starved private sector in the past.

The coronavirus has changed the narrative. Last weekend, regulators said that they would agree to another extension for banks struggling to meet the new rules. Caixin, a Chinese media outlet, recently reported that the grace period could be pushed back by one more year to 2021.

 

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