In response to the economic paralysis brought about by the coronavirus, Chinese banks are offering billions of dollars in loans to Chinese companies, according to two banking sources via Reuters.
About 300 Chinese firms, including top food delivery company Meituan Dianping and smartphone maker Xiaomi, have requested upwards 57.2 billion yuan ($8.2 billion) in loans to prevent a hard landing as China's economy grinds to a halt.
The sources said the firms seeking loans are either the hardest hit or have an active role in the control of the virus outbreak.
Evercore ISI Chairman Ed Hyman warned last week that China's GDP growth could post "zero for the first quarter ... China is really slowing and that's worrying people for sure."
"We are so solid," Hyman said. "It's not the virus, it's the trade that matters. People are not going out. They are not shopping, and that's what's hurting particularly China."
The scale of disruption in China is already staggering and is already spreading worldwide... and fast, China is effectively shut down and goods are now stranded in floating quarantines.
As Goldman noted here, the overall impact on global growth is about a 2% cut in Q1...
Extended factory closings and supply chain disruptions have forced many companies to request loans for "fast-track approvals and preferential rates," the sources said.
The sources reviewed several lists of companies that Chinese banks will be distributing loans to. They said no official data is showing total loans requested.
The list includes pharmaceutical firms and restaurants, who've requested help from banking authorities.
"Banks will have the final say on lending decisions," one of the sources said. "The interest rates are likely to be on par with those offered to banks' top clients."
The list included Xiaomi, which requested 5 billion yuan ($716.24 million) in loans to convert several production lines into mask and medical equipment making.
Meituan Dianping has asked for 4 billion yuan ($572.99 million) to finance free food and delivery to first responders and other government workers helping to contain the outbreak in Wuhan.
Didi Chuxing, "severely impacted by the virus outbreak," is requesting 50 million yuan ($7.16 million).
Beijing-based internet security company Qihoo 360 has asked for 1 billion yuan ($143.25 million) to purchase and distribute medical-related products. The internet company will also fund new programs that will build apps for virus tracking.
Facial recognition startup Megvii asked for 100 million yuan ($14.32 million) to develop AI technology that would be used in china's surveillance network to monitor if people are wearing masks.
We've noted that the People's Bank of China pumped $243 billion into financial markets to prevent a market crash. On Monday, Feb. 03, China's equity market shed $393 billion of its value.
When a crisis emerges, China has always thrown money at the problem to "cushion" the side effects and create a soft landing. But this time is different, and excessive monetary policy, which failed to turn up the second-largest economy late last year, is now flooding the system with even more loans for businesses. If it's a ploy by Beijing to spark new credit creation, it's likely temporary, as a hard landing could be nearing.