China’s bond market is sending a warning signal to the world
Soft yields are a vote of no confidence in government policy, a forecast that economic conditions will not improve and a warning that deflation will take root if nothing is done to stop it.
There is a bubble in the Chinese government bond market – or so, at least, the People’s Bank of China would fervently like to believe. A bubble would be a worrying risk to financial stability.
The existence of such a risk, however, is far more palatable than the plausible alternative: that bond markets are sending out an increasingly dire signal of concern about the prospects for China’s economy, the danger of deflation and the need for a change of course.
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Financial Times
Robin Harding is the Asia editor of the Financial Times
