Mainland Chinese Stocks and People’s Bank of China

The people’s Republic of China has the second-largest economy in the world after the U.S. However; the economy continues to slow down due to internal and external factors. In this situation, the coronavirus outbreak may cause serious problems for the economy. Yesterday it was the first day of trading for the Chinese stocks.

Two days ago, the People’s Bank of China said it would inject 1.2 trillion yuan ($173 billion) in the Chinese markets. Bank plans to buy short term bonds to boost banks’ ability to lend money.

Chinese stocks had a bad day on February 3. The Chinese government should come up with a plan on how to cope with problems. Otherwise, the growth rate could fall by two percentage points in the first quarter.

Stocks in Asia

As stated above, it was the first day of trading after the Lunar New Year Holiday. Stock markets in China were closed since January 24.

The Shanghai Composite fell 7.7%. Meanwhile, the Shenzhen Component Index declined by nearly 8.5%.

It is important to mention that losses eliminated $445 billion in market value. Moreover, it was the worst day for the Shanghai Composite since August 2015’s “Black Monday.” During that period, the possibility of an economic slowdown in China caused problems for the stock markets.

The impact was even bigger for the Shenzhen, as last time it experienced similar problems more than ten years ago.

Global markets had time to react to the virus outbreak; meanwhile it was the first trading day for the mainland Chinese stocks after an extended holiday. The Chinese government was forced to extend the holiday as authorities are trying to control the outbreak.

Markets in other Asian countries also experienced problems on Monday. For example, in Japan, Nikkei 225 fell 1%. In South Korea, the benchmark Kospi closed down a fraction of a percent.

The stocks across the region are struggling due to the coronavirus outbreak. It will take time to stabilize the situation.