China’s 10-year yield drops to 1.64%, an all-time low. Japanification in full swing. Could fears of yuan devaluation trigger another global market selloff?

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China’s economy is teetering on the edge of crisis, and the signs are unmistakable. Bond yields have fallen to record lows, with the 10-year yield plunging to 1.64%, and the interbank 30-year bond yield hitting an all-time low of just 1.855%. This marks a massive blow to investor confidence, signaling underlying economic turmoil that no one can ignore.

Japanification in full swing. https://t.co/VIva4Fh9HV

— The Great Martis (@great_martis) January 2, 2025

🇨🇳#CHINA'S INTERBANK 30-YR BOND YIELD EXTENDS DECLINE TO NEARLY 6 BPS, HITS NEW LOW AT 1.855%
10-YEAR BOND YIELD FALLS OVER 4 BPS TO BELOW 1.62%, HITTING NEW RECORD LOWhttps://mktnews.com/flashDetail.html?id=20250102134810155800 https://t.co/Po64uboEV7 pic.twitter.com/qYYVDVi7a1

— CN Wire (@Sino_Market) January 2, 2025

Adding to the alarm, China’s industrial profits have been in freefall. November 2024 saw a staggering 7.3% year-over-year decline, the fourth consecutive month of losses. For the first 11 months of 2024, industrial profits are down 4.7%, on track to record the largest drop in history. Despite government stimulus efforts, demand remains weak, and the industrial sector continues to buckle under the pressure.

On the first trading day of 2025, the Shanghai Composite Index dropped by 3%, and the Shenzhen index followed suit, falling over 3%. These declines aren’t just blips—they reflect the broader instability and the real possibility of a full-blown recession in the year ahead.

The core issue? A lack of domestic demand. Despite multiple stimulus packages, China’s economy is struggling to find its footing. This weakness is dragging down industrial profits and casting a dark shadow over the country’s future economic performance.

Even more concerning is the looming threat of a yuan devaluation. While China has historically used this strategy to boost exports and growth, the potential fallout from such a move could trigger a global financial selloff. The People’s Bank of China is under immense pressure to manage the yuan’s value carefully, but any misstep could have catastrophic consequences for global markets.

In short, China’s economic outlook is grim. Falling bond yields, plummeting industrial profits, and sinking stock indices are just the tip of the iceberg. With the government’s stimulus measures failing to make a dent, and recession risks mounting, the world watches with bated breath as China grapples with an uncertain future.

China’s economy is struggling:

China’s industrial profits fell 7.3% year-over-year in November, marking the 4th consecutive monthly decline.

This comes after profits saw double-digit declines in the 3 previous months.

As a result, industrial profits are down 4.7% for the first… pic.twitter.com/id5k29orqS

— The Kobeissi Letter (@KobeissiLetter) January 1, 2025

🇨🇳📉The Shanghai Composite Index extended its decline to 3% on the first trading day in 2025. Shenzhen fell by over 3%.#CHINA $SHCOMP $SSEC $ASHR $HSI $KWEB $FXI $HXC $DRAG $YINN $YANG https://t.co/7Egdxp5Q2H https://t.co/Rz8s06Kal4 pic.twitter.com/1mC3xXJuoZ

— CN Wire (@Sino_Market) January 2, 2025

‼️CHINESE STOCKS RECORDED THE WORST START TO A YEAR IN A DECADE‼️

The CSI 300 Index finished -2.9% on Thursday, the biggest decline on a year’s first day of trading since 2016.

The Hang Seng China Enterprises Index tumbled 3.1%.

The sentiment in China is getting even worse. pic.twitter.com/pWeMoeb7it

— Global Markets Investor (@GlobalMktObserv) January 2, 2025