China will likely seek to keep "abundant" liquidity in the country as it continues to grapple with the economic impact of a coronavirus outbreak, according to the world's largest investment firm BlackRock.
"I think from a measures perspective, I don't think we have seen all of it as yet," Neeraj Seth, head of Asian credit at BlackRock, told CNBC's "Squawk Box" on Thursday.
The outbreak of the COVID-19 virus has already killed more than 2,000 people and infected more than 74,000 others, most of them from China. It has also spread to more than two dozen countries and has triggered sell-offs in some financial markets and prompted a few governments to downgrade their economic outlook.
Seth's comments came before China cut its loan prime rate (LPR) on Thursday morning, a move that could lower borrowing costs for businesses.
In a widely expected move, the People's Bank of China on Thursday cut its 1-year LPR by 10 basis points, while the 5-year LPR saw a 5 basis points reduction. The announcement came days after the People's Bank of China reduced the .
The LPR is the interest rate that banks charge their most creditworthy customers. In August last year, the Chinese central bank changed the way commercial lenders set interest rates for loans.
The coronavirus outbreak in China has delayed the return of operations in factories following an extended Lunar New Year holiday. It has also raised concerns over its potential economic impact, both domestically as well as internationally. Earlier this week, Apple warned it did not expect to meet its second-quarter forecast for revenue, and cited lower iPhone supply globally as well as lower Chinese demand due to the outbreak.
Fiscal measures may be used
Questions remain over how the credit flows into the system, Seth said.
This is especially so for small and medium businesses that are feeling the pressure, he added. "A lot of these factories have been shut for more than a month, they probably still remain at a low utilization rate for (a) coming month or two."
Beyond that, Seth said Beijing is expected to show more "fiscal impulse."
"We do expect to see a combination of the monetary and the fiscal policy coming together to support the economy. To some extent, the fiscal impulse is going to be a function of how much of downside risk is there which is still uncertain to some extent given we're still in the middle of it," he said.
Asked about the potential magnitude of the fiscal measures that China could take, Seth said it will likely be "more measured" compared to the spending that was made following the 2008 global financial crisis.
China's economy today is much bigger than it was back then, he said, adding that the total debt in the system has also gone up significantly. That means the cost of servicing that debt would be "quite high as a percentage of GDP."
— CNBC's Amelia Lucas contributed to this report.