Bloomberg today published a special article on the risk of China's deflationary spiral. The article reminded investors that the current economic situation is not optimistic. The 10-year yield on Chinese government bonds has hit a record low. If the Chinese economy continues to do nothing, the market sentiment may become even more pessimistic. , which in turn led to the recurrence of Japan's deflationary spiral dilemma after the bubble economy period in the 1990s. (Previous summary: Chaos) Chinese companies are issuing consumer vouchers in lieu of wages, and the Internet is choking: Can companies also print their own money? ) (Background supplement: RMB depreciates below 7.3 against the US dollar! China’s central bank: To maintain stable exchange rate and adhere to monetary easing stance) Bloomberg today published a special article titled (The market sounds the alarm: China faces the risk of a deflationary spiral) , reminding investors that the current economic situation in China is not optimistic. If the Chinese economy continues to fail, it may once again stage the deflationary spiral dilemma that followed Japan's "bubble economy period" in the 1990s. The yield on China's 10-period government bonds fell to historical lows. The article pointed out that in China's government bond market, which has a scale of US$11 trillion, investors are experiencing unprecedented pessimism, and some investors have even begun to bet that China's economy will reproduce Japan's 1990 era of deflationary spiral. In recent weeks, China's 10-year government bond yield has fallen to a historical low (1.606%), and the gap between the yield on similar bonds in the United States has reached an unprecedented 300 basis points (4.671% in the United States). The plunge in yields has brought Chinese government bond yields well below levels seen during the 2008 financial crisis and the COVID-19 pandemic. Ultra-low yields are one of the signs of deflation, underscoring market concerns that China may be in a recession that could last decades. Worry about economic stagnation. If market concerns come true, China's economy may be dragged down by long-term deflation and further intensify capital outflows. It is understood that at the end of last year, China's financial market experienced record capital flight. China's 10-year Treasury Bond Yield Lessons from Japan: If the government fails to eliminate market panic in time, economic recovery will become increasingly difficult. Although most investors in the market believe that China is unlikely to repeat Japan's deflationary spiral because the Chinese government's "economic control" "Compared to the Japanese government, it is even bigger.But the economic difficulties China is currently experiencing are very similar to Japan's post-bubble situation, including: a real estate collapse, weak private investment, sluggish consumption, high debt and an aging population. In this regard, the article mentioned that a clear lesson from Japan’s bubble economy is: “If the government fails to eliminate the pessimism among investors, consumers and companies in time, the difficulty of economic recovery will increase over time.” . Xin-Yao Ng, investment director of abrdn Plc, said: This is a vicious cycle that will get worse if not corrected. There is a psychological component to Japan's lesson. The longer this goes on, the weaker business and consumer confidence will be. Richard Koo, chief economist at Nomura Research Institute, also said: The bond market is already telling the Chinese people: "You are in a balance sheet recession." However, the Chinese government is not taking no action in response to the current economic weakness. Since September last year, China has launched a series of economic stimulus plans. Chinese President Xi Jinping even said: China is confident of achieving its growth target of about 5% in 2024. However, the market generally believes that China's policy measures are not strong enough to reverse the current economic difficulties, including weak consumer confidence, real estate market crisis and corporate environment. Uncertainty and other factors are still exacerbating deflation concerns. Economist: China's economic background is different from Japan's bubble period. On the other hand, not everyone agrees with the warning of "balance sheet recession." Wang Yingrui, an economist at AXA Investment Management, pointed out that China's current situation is different from that of the 1990s. There are significant differences in Japan at the end of the year, especially in China where lower average income levels provide more room for economic growth. A "balance sheet recession" refers to a sharp decline in economic activity when a large number of businesses and households simultaneously reduce spending and investment and increase savings in order to pay down debt. This situation usually occurs after an economic bubble bursts. Excessive debt pressure prevents funds from flowing into the real economy, further triggering long-term downturn and deflation. In addition, some economists believe that the economy may rebound in 2026 as the cumulative effects of stimulus measures appear and the real estate market may bottom out.Bloomberg economist David Qu said: The real estate industry's drag on the economy may lessen, while emerging industries including electric vehicles will play a greater role. Related reports Protecting rights or cutting leeks? Big Bitcoin investors criticized Solv Protocol and issued token $ZAI (Binance is giving away money again) Megadrop launched Solv Protocol, how does the pledge protocol release Bitcoin liquidity? Bitcoin dropped by US$96,000, Huida fell by 6% and crashed U.S. stocks, may the Fed cut interest rates only once this year? "China's government bond yields hit record lows! Bloomberg warns: It may trigger a deflationary spiral and follow the footsteps of Japan." This article was first published on BlockTempo (Dong District Dongzhu - the most influential blockchain news media).