PBoC extends market closure as coronavirus spreads rapidly

Chinese central bank extends interbank markets closure and vows to maintain ample liquidity

Outbreak: Wuhan, a mega-city in central China, is the epicentre of the virus outbreak

China’s central bank has ordered interbank markets to remain closed until February 3, as the country fights to contain the spread of the coronavirus.

These markets include the interbank money market, interbank bond market, interbank foreign exchange market, gold market and the commercial bills market, the People’s Bank of China said on January 28.

“The PBoC will use its monetary policy tools such as open market operations to make sure there is enough liquidity to handle the transactions after the markets reopen,” the central bank said.

The announcement came after the Chinese government extended the New Year holiday to February 2, in a bid to discourage travel and limit the spread of the virus.

As of today (January 29), the 2019 Novel Coronavirus (2019 n-CoV), which causes acute respiratory illness, has infected more than 6,000 people and killed 132 in China. The outbreak coincided with the Lunar New Year holiday, when millions of people travel across China to visit relatives.

The Chinese securities regulator also extended a stock market closure until February 3. Both the Shenzhen and Shanghai stock exchanges have been closed since January 24 for the holiday.

The PBoC has also raised the transaction volume limit for its bulk electronic payment system from January 24, as donations flood in to aid the medical system of Wuhan, a mega-city in central China and the epicentre of the virus outbreak. The cap per transaction has been lifted to 500 million yuan ($72 million), from one million yuan.

The bulk electronic payment system had processed 439 transactions with a transaction value higher than 10 million yuan between January 24 and January 26, for a total of 43.3 billion yuan, the central bank said.

Cash management may be a challenge too. Before the Lunar New Year holiday, a period of high cash demand, the PBoC’s branch in Wuhan had asked for four billion yuan in cash. However, the city is now under quarantine, so people may be forced to use more electronic payments, where possible.

This article first appeared on sister website Central Banking.

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