Study: COVID-19 stimulus measures are helpful, but not equally

Updated: Apr 9, 2020 Print
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After the COVID-19 outbreak in China moved into the mitigation stage, public attention perceptibly shifted more towards the nation's economic health. The latest example of that shift is a new study shedding light on how the country's stimulus measures helped its stock market.

The research - co-authored by Professor Xue Jian and Phd student Gu Pu from the elite Tsinghua University - picked 3,411 companies listed on China's A shares which were benefited from these measures, and analyzed their market performance in response to the various measures carried out by some municipal governments to combat the outbreak's influence.

The measures - covering seven categories from speedy approval to credit supports to tax cuts - were found to have achieved their desired effects by stabilizing China's macro-economy and shoring up the stock market, according to the researchers, who published their findings in the business magazine Caijing on Saturday.

But the different measures helped in different ways.

Measures immediately effective and easily available, like simplified government approval and cost deduction (like rent relief etc.), tended to have the most direct and dramatic impact. The market tended to be less responsive to, or took more time to respond to, measures that had specific eligibility or needed prior application, like credit supports and transportation support subsidies.

Locality also played a role. Measures taken by local authorities had a greater impact on the companies in those specific localities. The researchers also found, a bit more surprisingly, that companies in areas with severe infection tended to have a more dramatic market response than those in less severe areas. One hypothesis was that the former were more susceptible to production disruption and cost inflation and thus more responsive to government help, according to the study.

Other factors included company size and technology level.

The study divided the listed companies into two groups based on the size of their assets, and found that the small-sized companies tended to be more responsive, with the government measures' impact strengthening over time.

The study also found that high-tech companies, with heavy research investment, tended to suffer less on the stock market before the stimulus measures, and rebound more dramatically afterwards. Less tech-intensive companies, on the contrary, tended to suffer more beforehand and benefit less later.

Based on their study, the researchers recommended that the government roll out stimulus measures more tailored to market needs, with greater emphasis on small businesses, high-tech businesses and those located in severe areas, so as to "help the enterprises restore production, stimulate consumption and stabilize exports and promote a rapid economic recovery."

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