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As Chinese leaders gradually came to see the coronavirus as a public health emergency that could be a serious threat to economic growth, Beijing announced a raft of measures to stabilize its financial markets and support domestic businesses.

The People’s Bank of China injected CNY1.7 trillion ($243 billion) into the financial system early this month and is expected to continue liquidity support through open market operations. Larger banks have announced lending rate cuts for vulnerable or epidemic-affected borrowers.

The finance ministry said Wednesday it would auction billions of yuan in additional bonds beginning next week, which came one day after it gave the green light to local governments to issue a further CNY290 billion of special-purpose bonds early, on top of the CNY1 trillion allocated in November.

The Industrial and Commercial Bank of China, the country’s biggest lender and the world’s largest company by assets, said Tuesday that it has issued CNY43 billion of loans since January 24 to combat the outbreak and help companies resume production.

Even if there wasn’t consensus about whether these measures would work, it began to matter less in recent days. The number of new daily coronavirus cases began to fall, the epidemic seemed to be turning a corner, and markets were taking note. Major U.S. indexes rose Wednesday in response to the improving situation, with the Dow Jones Industrial Average and Nasdaq Composite closing up nearly 1%. Even oil was beginning to rebound after weeks of declines.

That was before Beijing suddenly adjusted the way it counts new infection cases—a move that caused China’s total confirmed cases to leap 45% overnight and the number of daily deaths to hit a record high.

Hours later, Chinese state media announced the firing of the top official in Hubei Province, home to the city of Wuhan and ground zero for the epidemic, as well as the ousting of several other high-level bureaucrats.

Markets may take this all in stride even though U.S. stock futures immediately declined, as did the offshore yuan. But the new information will almost surely reignite the debate over Beijing’s economic rescue measures, how long they will be needed, and how bad the hit will be for the world’s second-largest economy.

One area, in particular, is back at the forefront—local debt. Policy makers have directed regional lenders to tolerate a higher threshold for bad loans, hoping to keep thousands of small- and medium-size enterprises (SMEs) from collapsing amid the economic standstill. A survey conducted recently by Peking and Tsinghua universities—China’s top two schools—found that two-thirds of such firms said they could stay afloat no more than one to two months with their current savings. An additional 18% said they could last at most three months.

Put another way, 85% of China’s SMEs would crumble within three months without financial injections of some sort.

Thus, among the slew of other policies, regulators in the city of Shanghai and the provinces of Zhejiang and Jiangsu told banks to be more lenient toward bad loans and to lower their own forecasted profits. Shanghai’s banking regulator told lenders not to enforce their usual standard that classifies overdue repayments as non-performing loans (NPLs) after 60 or 90 days. It also told banks to refrain from punishing defaulted borrowers with credit downgrading or punitive interest adjustments.

Other local-level regulators are taking similar actions.

In normal times, a temporary reprieve from banks to help teetering firms in times of crisis could be a smart and successful policy move. But for China’s economy, these are no normal times.

The country’s GDP growth is at a 30-year low, hitting 6.1% in 2019, and is expected to fall to anywhere from 1% to 5% in the first quarter because of the epidemic, according to various analyst estimates. The trade war hasn’t helped matters either.

But perhaps the most painful fact for these lenders is that China’s long-running debt problems reached a tipping point even before the coronavirus, crippling numerous small banks and raising concerns about a systemic liquidity crunch. The lack of confidence resulted in multiple rural bank runs. Furthermore, years of so-called “shadow banking—unregulated, off-the-books lending—means that current debt estimates are probably much lower than is measurable.

And now the government is demanding these overleveraged institutions step up to the plate to save struggling firms, which has raised skepticism even from within China’s establishment over the wisdom of these policy prescriptions.

“Government pressure on banks to issue such loans to enterprises may not solve the difficulties caused by business suspension and reduced income,” said Liu Xiaochun, vice president of the Shanghai Finance Institute and former president of China Zheshang Bank, Zhejiang’s biggest lender. “It will increase the cost of liabilities of enterprises and increase the risk of subsequent operations.”

And “for banks, of course, it increases credit risk,” Liu said.

Numerous local lenders have extensive exposure to SMEs, but even some larger banks are at short-term risk if such firms fail, according to Morgan Stanley Asia. Those most exposed are the Postal Savings Bank of China, Minsheng Bank, Chongqing Rural Commercial Bank, and China Merchants Bank.

But “despite the pressures, we think that NPL pressure from bank’s SME loan book still looks manageable at this stage,” Morgan Stanley said in an emailed statement before the spike in coronavirus cases.

With all these variables at play, it makes it difficult to predict what it means for China, much less for foreign investors. For instance, who will eventually absorb the losses? How will asset and commodity prices be affected? How big of a hit will China’s economy take?

The epidemic has revived the years-long concerns about China’s unaddressed debt problem. And unfortunately for everyone, that is only one among a handful of problems for the country’s economy.

Tanner Brown is a contributor to Barron’s and MarketWatch and producer of the Caixin-Sinica Business Brief podcast.