China’s 10-year government bond yield fell to around 1.67% on Wednesday, approaching its lowest level since mid-June 2025. The decline comes as banks increasingly shift into government securities to bolster returns amid sluggish demand for mortgages and consumer credit.
Banks’ claims on the government rose to 16.4% of total assets in July, up from 11.5% five years earlier, while claims on households declined to 16.4% from 20.3%. This marks the first time the share of government claims has overtaken that of resident claims, underscoring Beijing’s difficulty in reviving credit demand after a historic property downturn and a protracted slump in consumption.
On the macroeconomic front, annual consumer inflation accelerated to 0.8% in August, in line with market expectations and up from July’s six-month low of 0.5%. Producer price inflation also quickened to 3.8% from 3.5%, exceeding the consensus forecast of 3.7%. The renewed price pressures were driven largely by higher energy costs amid persistent tensions in the Middle East.
