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According to some Chinese policy insiders, the policymakers are prepping up measures to limit the shock of a coronavirus outbreak on first quarter economic growth, per Reuters.

Key Quotes:

The government is debating whether to lower the planned 2020 economic growth target of around 6 percent, which many private sector economists see as well beyond China’s reach.

Currently, monetary policy is being loosened, but the central bank will follow a step-by-step approach and watch the virus situation.

We have policy reserves and will step up policy support for the economy. The most urgent task is to put the virus outbreak under control.

Support measures will be concentrated on the retail, catering, logistics, transportation and tourism sectors, which are likely to be hit hard and are especially vulnerable to job losses.

It’s necessary to step up policy support for the economy but we don’t need to use strong stimulus at this stage.

Market Implications:

The Chinese central bank (PBOC) has already pumped in a lot of funds in the system over the last two days to calm markets after the country’s stock market crashed 8% amid rising coronavirus death toll and fears over an economic slowdown.

These added efforts by the Chinese authorities could likely play a major role in reviving investors’ confidence, as the market mood remains buoyed so far this Tuesday. The US Treasury yields are nearly 4% higher while USD/JPY extends the break above the 109 level.