China will make further targeted RRR cuts to cushion virus impact

BEIJING (Reuters) - China will make further targeted cuts in the reserve requirement ratio (RRR) for medium- and small-sized banks to help cushion the impact of the global coronavirus outbreak, state media reported on Tuesday, quoting a cabinet meeting chaired by Premier Li Keqiang.

"We need to strengthen the adjustment of fiscal and monetary policies in the face of new challenges from the domestic and international epidemic situation and rapid changes in the world economic and trade situation," the cabinet was quoted as saying.

China will increase re-lending and re-discount quotas for medium and small banks by 1 trillion yuan ($140.85 billion) and will issue more local government special bonds, it said.

It will also let financial institutions issue 300 billion yuan in bonds to support small firms and aims to increase corporate credit bond issuance by 1 trillion yuan from the previous year, the cabinet said.

China will issue more quotas on local governments' special bonds, supporting key projects, and all regions should strive to complete the issuance in the second quarter, it said.

The government will extend subsidies for new energy vehicle (NEV) purchases and extend NEV's purchase tax exemption for two years, it said.

The government has already rolled out a raft of measures, including more fiscal spending, tax relief and cuts in lending rates and reserve requirements, and low-cost loans for some firms, as the pandemic weighs on demand at home and abroad.

Last week the ruling Communist Party's Politburo called for expanding the budget deficit, issuing more bonds, guiding interest rates lower, delaying loan repayments, reducing supply-chain bottlenecks and boosting consumption.

Data on Tuesday showed factory activity in China unexpectedly expanded in March from a collapse the month before, but analysts caution that a durable near-term recovery is far from assured.

(Reporting by Colin Qian and Kevin Yao; Editing by Gareth Jones)