China’s government bond market has opened 2025 with a clear warning for policymakers: without more determined stimulus, investors expect deflationary pressures to become even more entrenched in the world’s second-largest economy.

China’s 10-year bond yield, a benchmark for economic growth and inflation expectations, fell to a record low of less than 1.6 per cent during trading last week and has since hovered close to that level.

Crucially, the whole yield curve has shifted downwards rather than steepening, suggesting investors are alarmed about the long-term outlook and not just anticipating short-term cuts to interest rates.

“For the long-term [bonds], yields have been trending down and I think that’s more about longer-term growth expectations and inflation expectations becoming more pessimistic. And I think that trend is likely to continue,” said Hui Shan, chief China economist at Goldman Sachs. 

Falling yields offer a stark contrast to volatile and rising yields in Europe and the US. For Beijing, the fall represents an ignominious start to the year after policymakers in September launched a stimulus drive designed to revive the Chinese economy’s animal spirits.

But data released on Thursday showed consumer prices remained close to flat in December, eking out growth of just 0.1 per cent on a year earlier, while factory prices declined 2.3 per cent, remaining in deflationary territory for more than two years.

China’s central bank last year unveiled policies to stimulate investment by institutions in equity markets and announced for the first time since the 2008 financial crisis that it was adopting a “moderately loose” monetary policy. 

On Friday, it announced a “shortage of supply” meant it would pause its programme that has seen it purchase a net Rmb1tn of government bonds on the open market.

An important Communist party meeting on the economy in December, presided over by President Xi Jinping, emphasised consumption for the first time over other previously more important strategic priorities such as building high-tech industries.

The change of emphasis reflects concern over household sentiment weakened by a three-year property crisis that has left the economy more dependent on a manufacturing and export boom for growth. Investors worry this run of strong exports will slow abruptly after US president-elect Donald Trump takes office on January 20 with promises to levy up to 60 per cent tariffs on Chinese goods.

Citi economists estimated in a research note that a 15 percentage point increase in US tariffs would reduce China’s exports by 6 per cent, knocking a percentage point off GDP growth. Growth in China was estimated to be 5 per cent last year.

More insidious than the slower growth, however, are the deflationary pressures in China’s economy, said analysts. The Citi economists noted that the final quarter of last year was expected to be the seventh in a row in which the GDP deflator, a broad measure of price changes, was negative.

“This is unprecedented for China, with a similar episode only in 1998-99,” they said, pointing out that only Japan, parts of Europe and some commodity producers had experienced such an extended period of deflation.

Chinese regulators are aware of the parallels with Japan on deflation, said Robert Gilhooly, senior emerging markets economist at Abrdn, but “they don’t seem to act like it, and one thing that contributed to the Japan example was going small with piecemeal easing”.

Goldman’s Shan said the central bank had promised to ease monetary policy this year, but just as important would be a large increase in China’s fiscal deficit at the central and local government levels.

How that deficit is spent will also be important. Channelling it directly to low-income households, for example, might have a higher “multiplier effect” than giving it to other sectors, such as to banks for recapitalisation, she said.

Frederic Neumann, chief Asia economist at HSBC, said another reason government bond yields were at record lows was that the economy was awash with liquidity. High household savings and low demand for corporate and individual loans have left banks flush with cash that is finding its way into bond markets.

“It’s a little bit of a liquidity trap in the sense that there is money, it is available, it can be borrowed cheaply, but there’s just no demand for that,” said Neumann. “Monetary easing at the margin is becoming less and less of an effective driver of economic growth.”

Without a strong fiscal spending package, the deflationary cycle might continue, with interest rates dropping, wages and investment falling and consumers deferring purchases while they wait for prices to fall further.

“Some investors have lost a little bit of patience here in the past week,” he said, referring to the rush into bonds. “It’s still likely we’re going to get more stimulus coming through. But after all the fits and starts of the past couple of years, investors really want to see concrete numbers.”

Some economists warned that the slide in Chinese bond yields could have further to fall. Analysts at Standard Chartered said the 10-year yield could fall another 0.2 percentage points to 1.4 per cent by the end of 2025, especially if the market has to absorb higher net central government bond issuance for stimulus purposes.

(FOX 9) – Former President Jimmy Carter’s state funeral was a somber time of remembrance, but also a celebration of a century of life, well-lived.

Funeral held for Jimmy Carter

Carter memorialized:

Former President Jimmy Carter’s state funeral was held on Thursday at the Washington National Cathedral.

Several speakers memorialized the 39th President who died in Dec. 2024 at age 100., including President Joe Biden.

Minnesota ties remembered as Carter’s VP’s words read during service

Eulogy deliver by son:

The words of Carter’s Vice President, Minnesotan Walter Mondale, were read by his son, Ted Mondale. Walter Mondale passed away in 2021.

“My father wrote this in 2015. He edited it a couple of times since then, but here we go,” said Ted. “I was surprised when then-candidate Gov. Carter asked me to join him as his running mate in 1976. He amazed me then as he has every year since.”

In the eulogy he left, he spoke about the Carter he knew as a selfless man of integrity and the how the two were bonded by the same faith.

“While we had only four years in the White House, he achieved so much in that time. It stood as a marker for Americans dedicated to justice and decency,” said Ted. “I was also a small-town kid who grew up in a Methodist church where my dad was the preacher, and our faith was core to me as Carter’s faith was core to him.”

Ford’s son speaks:

Former President Gerald Ford had also left a eulogy before he passed away in 2006. His son, Steve Ford, delivered the remarks.

He described a friendship that transcended politics.

“It was because of our shared values that Jimmy and I respected each other as adversaries, even before we cherished one another as dear friends,” said Steve.

And his written words remembered a man whose legacy remains timeless.

“A man whose life was lived to the fullest, with a faith demonstrated in countless good works, with a mission richly fulfilled, and a soul rewarded with everlasting life,” said Steve.

Final resting place::

Carter will be laid to rest in his hometown of Plains, Georgia.

Elon Musk on Thursday inserted himself into the debate over the role climate change plays in wildfires as at least five fires scorched the Los Angeles area, charring entire neighborhoods, killing at least five people and forcing tens of thousands to flee.

“Climate change risk is real, just much slower than alarmists claim,” Mr. Musk wrote to his 211 million followers on X, the social media site he owns. He said the loss of homes was “primarily due” to “nonsensical overregulation” and “bad governance at the state and local level that resulted in a shortage of water.”

But scientists are clear: A warming planet, driven largely by the burning of fossil fuels, has created the conditions for increasingly destructive wildfires, along with more damaging hurricanes and other extreme weather.

Studies have found that extreme wildfires are getting more frequent and more intense, and fires are spreading faster, too.

“Wildfires have become larger and more frequent because of climate change in the Western part of the United States,” said Michael F. Wehner, a senior scientist at Lawrence Berkeley National Laboratory. Regarding Mr. Musk’s comments, he said, “I find the whole thing pretty alarming.”

Scientists are unable to say with certainty that any single weather event was caused by global warming. But coming off the hottest year in history, the Los Angeles area has received less rainfall since the start of the rainy season in October than almost any other year since record-keeping began in 1877.

That drought turned vegetation into ready kindling, and temperatures have been above normal, further drying out grasses and scrubs. At the same time, Santa Ana winds have been unusually ferocious, blowing as fast as 100 miles per hour.

Benjamin Hatchett, a fire meteorologist at the University of Colorado, said there have been dry starts in past years but the combination of drought and high winds is fueling more destruction.

“This is probably just a bad, unfortunate, confluence of events,” Mr. Hatchett said. “I would be very hesitant to immediately say this is climate change and I don’t think that’s the right message here.

But because of climate change, he said, “this is the kind of conditions we expect to see more of going into the future.”

President-elect Donald J. Trump, Mr. Musk and other Republicans have sought to politicize the wildfires, using it as a way to attack Democratic officeholders in California. Mr. Trump in particular has seized on environmental regulations, including federal and state protections for California’s endangered delta smelt fish. He falsely claimed that those regulations led to inadequate water availability for firefighting efforts.

Peter Gleick, co-founder of the Pacific Institute, a California research organization that focuses on water, said Mr. Trump was spouting “complete nonsense.”

“There’s no link between California’s water policies and efforts to protect endangered species and water availability for firefighters,” Mr. Gleick said. “They’re completely unrelated.”

He noted that Southern California reservoir levels, including ones that feed Los Angeles, are above normal for this time of year. “There’s no water shortage,” he said. “The real issue is that urban water systems are not built or designed to fight massive, urban wildfires.”