Another country now faces a significant risk of economic stagnation warned veteran economist Mohamed A. El-Erian, in an X post, as the the major economic power’s short-term bond yields plummeted to a two-decade low on Friday.
What Happened: The yield on one-year Chinese government debt sharply declined 17 basis points on Friday, settling at 0.85%, the lowest level observed in over 20 years since 2003. This followed a significant event earlier in the trading session when yields briefly dipped below the psychologically important 1% threshold.
El-Erian is the former CEO and co-CIO at Pimco and the current president of Queens College at Cambridge University. According to him, Japan is recovering from an “awful economic trap” while China moves toward “Japanification.”
Last month China’s long-term 30-year bond yields dipped below those of Japan. This development is interpreted by investors as a signal that the Chinese economy may be entering a phase of “Japanification,” characterized by sluggish economic growth and persistent low inflation.
A common refrain 20 years ago in the West was that “Japan could not happen here.” That was proven wrong for quite a few other advanced …Full story available on Benzinga.com
