China's bond market, the second largest in the world, is sending troubling signals as the economy falters. Investors are retreating into government bonds, a classic safe haven, as confidence in riskier assets wanes. Despite the Communist Party's attempts to project economic stability, falling yields tell a different story. The People's Bank of China (PBOC) is stepping in aggressively, attempting to control the surge in bond prices, but the intervention highlights deeper issues.
State banks have started dumping long-term treasuries to stabilize the market, echoing previous efforts to manage the yuan. The PBOC has even halted liquidity injections for the first time in years, signaling a more forceful stance. However, experts warn that these measures may only slow, not stop, the bond bull run. With economic recovery uncertain and inflation still low, the pressure on China's financial system is mounting.
China, oh Chinna. Trouble in paradise, like always. No matter how aggressive the PBOC is, it will never catch up to the %^%$storm that is about to happenn.
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How is unprecedented demand and rising prices for government issued bonds a bad thing?
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at this point you have to think politically. nothing is worse in a fiat money system than the deflationary tendencies that the chinese economy has been showing for some time, not least the collapse of the real estate market. the falling interest rates indicate that investors are fleeing risky asset classes for the supposedly safe haven of government bonds, thus signaling to the market in general that they expect the economy to slow down. the chinese party leadership cannot afford this.
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The CCP is in for it. That belt and road initiative will be a failure it won’t provide the growth they need and they never got rich enough to become the new world power.
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And yet their proxies Iran and Russia are causing quite an impact and expense upon the current dominator of global resources, wealth and power. China now can provide an alternative to the SWIFT trade payments network and China can supply most of the complementary manufactured goods required by resource exporting nations like Iran and Russia. China gets discounted oil and gas while Russia and Iran attack the west and its associates causing huge cost to the USA. China continues to expand its global reach while USA is handing over Iraq, after huge expense invested, to the Chinese oil companies who have been restoring Iraqs oilfields along with Iran. Who is the winner and who is the loser?
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