Monetary Measures to Heal the Economy Amid Epidemic Outbreak

In 2020, with the spread of COVID-19 all over the country, China’s economy is predicted to encounter periodic impact. In order to avoid the short-term shocks becoming long-term risks, the related monetary policy needs to be released in advance. As restricted by the epidemic situation, the positive finance presumably encounters the bottlenecks of scale, time lag, and effectiveness, which is different from the SARS period. Meanwhile, with the release of inflation constraints and term spread constraints, the space for LPR reduction is expected to further expand, which could be the support of monetary policy regulation. Therefore, we predict that in 2020, across-the-board RRR cuts and LPR reduction are expected to be released in advance, while the structural policy tools will focus on epidemic areas, services, and SMEs. In 2020, the long-term trend for Chinese economic development will not change.