The People's Bank of China (PBOC) said on Friday that it will step up financial support to crucial sectors hit hard by the coronavirus. So far this week, China's central bank has injected a total of 1.7 trillion yuan (243 billion US dollars) worth of liquidity into the money market via reverse repos. 

These came earlier than expected, as commercial bank liquidity is usually quite ample after the Spring Festival. Analysts read that as a clear signal that monetary policy will be eased further to counter the economic impact of the coronavirus epidemic.

"One is to boost confidence in the financial market," said Jimmy Zhu, the chief strategist at Fullerton Research. "The other is to conquer the negative impacts of the coronavirus because lots of business operations have shut down for the time being. For the next easing, we expect PBOC will examine the economic data manufacturing PMI, imports and exports data, industrial productions for the month of February will be very important to decide the pace of the PBOC easing for this year."

Han Tan, market analyst at international foreign exchange platform FXTM, echoed Zhu's views, saying he expects monetary policy will remain supportive. "That's a key policy tool where they're supportive of the economy and the financial markets as long as this outbreak persists."

Tan added that PBOC has and will offer more measures of support and comfort for investors, especially equity investors.

A major task for the central bank is to ensure sufficient support for small and medium-sized firms (SMEs). On Feb. 1, 30 separate measures were taken by China's financial watchdog in efforts to ensure the stability of the financial market. And just today, the PBOC has announced the issue of 30 million yuan in designated loans with favorable interest rates to support firms in major industries such as pharmaceuticals and household supplies.

Chen Ji, a senior analyst at Bank of Communications, attributed the major challenges for SMEs to the interruption to their business plans and the lack of staff due to the coronavirus. "The central bank has already implemented abundant measures to help them including lowering interest rates, ensuring loan issuance and improving finance efficiency.”

PBOC deputy governor Pan Gongsheng said on Friday that the spreading epidemic will challenge industries like tourism and hospitality, but he believes the shock will be temporary and that the economy will rebound once the virus abates.