BEIJING (Reuters) – A Chinese central bank official called on Sunday for stepped up global policy coordination to manage the economic impact of the coronavirus outbreak, and said Beijing’s recent policy measures were gaining traction while it had capacity for further action.

Chen Yulu, a deputy governor at the People’s Bank of China (PBOC), also told a news conference that PBOC Governor Yi Gang had exchanged views with U.S. Federal Reserve Chairman Jerome Powell, the International Monetary Fund and other agencies.

“The global epidemic is spreading rapidly. It’s urgent for all countries to strengthen international coordination in macro policies such as public health policy, trade policy, fiscal and monetary policy,” Chen said.

“We will actively participate in international cooperation in response to challenges posed by the complex situation.”

Chen said that while downward pressure on the global economy is increasing as the virus rattles financial markets, he said he expects significant improvement in the Chinese economy in the second quarter.

Private-sector analysts are slashing their growth forecasts for China to lows not seen since the Cultural Revolution ended in 1976, with a sharp contraction expected in the first quarter.

“At present, the operation of China’s financial market is generally stable, market expectations are relatively stable, and the space for macro policies and tool reserves are sufficient,” Chen said.

The PBOC will keep liquidity reasonably ample, keep growth of M2 money supply and total social financing in line with nominal gross domestic product (GDP) growth and aim for slightly higher credit rise, Chen added.

The PBOC has already rolled out a raft of measures, including cutting lending rates and banks’ reserve ratios, and doling out cheap loans for selected firms, to cushion the blow to the economy from the coronavirus outbreak.

China, where the virus outbreak originated late last year in the central city of Wuhan, is widely expected to see its economy contract in the first quarter due to efforts to contain the spread of the disease.

While the coronavirus is expected to continue exerting upward pressure on China’s consumer prices in the near term, inflation could ease in the coming quarters, he said.

Chen also said he expects China’s yuan currency to remain stable around 7.0 to the U.S. dollar in the near term, due in part to ample foreign exchange reserves.

The country’s debt market is stable, with no significant rise in defaults, he said during a briefing where he was joined by other senior Chinese financial regulators.

Zhou Liang, vice chairman of the China Banking and Insurance Regulatory Commission, said China is ready to buffer financial risks caused by the virus outbreak, and is studying plans to reform the country’s asset management companies that are tasked to deal with bad loans.

China’s non-performing loan ratio rose to 2.08% at the end of February, Zhou said, adding that China’s banking sector has disposed of a total of 5.8 trillion yuan ($817.48 billion) in bad loans in the past three years.

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