China's economy is projected to grow by over 5% this year, prompting notable movements in the bond market. On December 2, 2024, the yield on China's 10-year government bonds fell below 2%, reaching 1.9636%, the lowest level in 22 years. This decline is attributed to expectations of expanded stimulus measures from Beijing to support the economy.
The People's Bank of China (PBOC) recently injected 800 billion yuan into the banking system, increasing liquidity following a previous 500 billion yuan injection in October. The PBOC aims to maintain adequate liquidity levels and has indicated a potential reduction in the reserve requirement ratio for commercial lenders.
Despite some recovery signs in the property market, domestic economic data has shown little improvement in recent months. Analysts warn that without significant fiscal stimulus, China may face a deflationary environment. The offshore yuan weakened by 0.45% to 7.2795 against the dollar.
Upcoming meetings of the Politburo and the annual central economic work conference are anticipated to set economic plans and growth targets for 2025. Additional stimulus measures are expected to be announced during these meetings, potentially influencing market dynamics and bond yields.