WASHINGTON (Reuters) – China’s economy is beginning to show some signs of normalization after the full-blown shock caused by coronavirus but stark risks remain, International Monetary Fund officials said in a blog on the economic impact of the pandemic.

Most larger Chinese firms have reopened and many local staff have returned to work but infections could rise again as national and international travel resumes, the officials said.

Outbreaks in other countries and financial market gyrations could also make consumers and firms wary of Chinese goods, just as the economy is getting back to work, they said.

The coronavirus, which has infected 250,000 people and killed more than 10,000, has wreaked havoc on the global economy. In China, the slowdown in the first quarter will be significant, leaving a deep mark on the full year, the IMF said.

“What started as a series of sudden stops in economic activity, quickly cascaded through the economy and morphed into a full-blown shock simultaneously impeding supply and demand,” the IMF blog said, highlighting very weak industrial production and retail sales data in January and February.

But it said China’s response thus far showed that the right policies made a difference in fighting the disease and mitigating its impact, albeit with tough economic tradeoffs.

China implemented strict constraints on movement at the national and local level at the height of the outbreak, devastating Hubei province where it originated but slowing the spread of the disease around the country, the blog said.

To mitigate the simultaneous shock caused to households, businesses, financial institutions and markets, Chinese policymakers quickly stepped in and targeted vulnerable households and small businesses, waiving social security fees, utility bills and channeling credit through fintech firms.

They also arranged subsidized credit to support scaling up production of medical equipment, backstopped interbank markets and supported firms under pressure, the blog said.

The authorities worked closely with banks too, incentivizing them to lend to smaller firms and providing targeted cuts to reserve requirements, while continuing to lend generously to larger firms and state-owned enterprises, the IMF said.

Given the ongoing economic risks, Chinese policymakers needed to be ready to continue to support growth and financial stability, if needed, and to coordinate internationally, given the global nature of the outbreak, the IMF said.

One opportunity to coordinate the international response would be through the world’s 20 major economies (G20), but divisions within the group could undercut those prospects, experts say.

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