China's government bond yields hit a new low! Bloomberg warns that it may trigger a deflationary spiral following Japan's footsteps.

Bloomberg today published a feature article on the risk of China's deflationary spiral, which reminded investors that the current economic situation is not optimistic, the 10-year yield of Chinese government bonds has hit a record low, and if China's economy does nothing more, it may make the market sentiment more pessimistic, which in turn will lead to the deflationary spiral dilemma in Japan after the Bubble Economy period of the 1990s. (Summary: Chaos" Chinese companies issue consumption coupons instead of wages, net: companies can also print their own money? (Background supplement: RMB depreciates below 7.3 against the US dollar!) China's Central Bank: To maintain the exchange rate, adhere to the monetary easing stance) Bloomberg today published a feature article titled "The market rings the alarm: China faces the risk of a deflationary spiral", reminding investors that the current economic situation in China is not optimistic, and if China's economy does nothing more, it may repeat the deflationary spiral after Japan's "Bubble Economy period" in the 1990s. China's 10-period Treasury Bond Yield Falls to Record Low Investors are experiencing unprecedented pessimism in China's $11 trillion treasury bond market, with some even betting that China's economy will repeat Japan's deflationary spiral of the 1990s. In recent weeks, China's 10-year Treasury yields have fallen to record lows (1.606%), leaving an unprecedented 300 basis points (4.671% in the US). The yield dump put Chinese government bond yields well below levels seen during the 2008 financial crisis and the coronavirus pandemic, and ultra-low yields are one of the hallmarks of Deflation, underscoring concerns that China could sink into decades-long economic stagnation. If market fears come true, China's economy could be dragged down by prolonged deflation and further exacerbate capital outflows. It is understood that at the end of last year, China's financial market had a record phenomenon of capital flight. China's 10-year government bond yield Japan lesson: If the government fails to eliminate market panic in time, economic recovery will become more difficult Although most investors in the market believe that China is unlikely to repeat Japan's deflationary spiral, because the Chinese government's "economic control" is greater than that of the Japanese government. But China's current economic woes are very similar to those experienced in the wake of Japan's economic bubble, including a real estate crash, weak private investment, sluggish consumption, high debt, and an aging population. In this regard, the article mentioned that a clear lesson given by Japan's Bubble Economy is: "If the government fails to eliminate the pessimism among investors, consumers and businesses in time, the difficulty of economic recovery will increase over time." Xin-Yao Ng, investment director at ABRDN PLC, said: "It's a vicious circle that will get worse and worse if left uncorrected. One of the psychological factors in Japan's lesson is that the longer this continues, the weaker the confidence of businesses and consumers will be. Richard Koo, chief economist at Nomura Research Institute, also said: "The bond market is already telling the Chinese people: "You are in a balance sheet recession." But the Chinese government is not inactive about the current economic weakness. Since last September, China has introduced a series of economic stimulus packages. Chinese President Xi Jinping even said: China is confident of achieving the 2024 RISE target of about 5% However, the market generally believes that China's policy measures are not strong enough to reverse the current economic difficulties, and weak consumer confidence, the real estate market crisis and uncertainty in the corporate environment are still exacerbating deflation concerns. Economist: China's economic background is different from Japan's bubble On the other hand, not everyone agrees with the warning of a "balance sheet recession", Wang Yingrui, an economist at AXA Investment Management, pointed out that China's current situation is significantly different from that of Japan in the late 1990s, especially since China's lower average income level provides more room for economic rise. A "balance sheet recession" refers to a significant decline in economic activity when a large number of businesses and households reduce spending and investment, and increase savings in order to service their debts. This usually happens after an economic bubble bursts, when debt pressures are too high to keep money from flowing into the real economy, triggering a prolonged downturn and deflation. In addition, some economists believe that the economy may recover in 2026 as the cumulative effect of stimulus measures emerges and the real estate market may bottom. David Qu, an economist at Bloomberg, said: "The drag on the economy from the real estate sector is likely to be lessened, while emerging industries, including electric vehicles, will play a greater role. Related Stories Rights Defense or Be Played for Suckers? 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