The central bank has responded to the economic fallout of SARS (severe acute respiratory syndrome) with a more specific package of lending policies, but analysts caution such moves should remain strictly temporary.

After urging banks earlier this month to guarantee loans to businesses manufacturing and selling equipment and medicines used in the fight against the virus, the People's Bank of China (PBOC) announced on Monday a string of other measures. These included calling on commercial banks to lend more to those regions and sectors, such as aviation, retail and tourism, companies and individuals most affected by the SARS outbreak.

It also urged banks to step up support to the health sector, increase loans for cars and non-luxury housing, and divert more loans to the information industry, such as e-commerce, which has enjoyed high growth during the past month as people sought to avoid direct contact with others.

With economic growth showing signs of a possibly SARS-inflicted slowdown in some regions, "those moves are, naturally, compensatory measures for certain regions and sectors," said Wang Zhao, a monetary policy analyst with the Development Research Center under the State Council.

The policies would deliver some support to sectors likely to be hit by SARS, with retail, aviation and tourism topping the list, but "will not have a sizable effect on the entire economy," he said.

Those measures should be phased out gradually or immediately terminated once the epidemic blows over, Wang stressed, as some sectors, like health and pharmaceuticals, are just being driven by SARS-derived surges of demand, but do not promise to be long-term economic drivers.

"They should be very temporary policies (justified only) under special circumstances," he said.

It is not yet clear how effective the central bank's policies can be, as banks insist commercial norms should not be disregarded.

"Unless they specify the projects and regions (that need help) the banks can't move along," said an official with a State-owned commercial bank. He said he was not aware of other, more detailed implementation rules.

"It's true that banks and businesses are interdependent and should co-operate in tough times like this," the official said. "But we have to make sure that their difficulties are caused by SARS and are provisional."

Commercial loans have surged in the first four months of the year as economic activity regained vigor, showing little sign that the flu-like disease is disturbing normal lending patterns.

(China Daily May 22, 2003)