MacroVoices · Thursday, August 13, 2026
Michael Howe notes that China's liquidity policy is diverging from the US, maintaining a tight stance to support the yuan. This has led to a debt problem, lacklustre growth, weak inflation, and falling bond yields in China, creating a unique economic scenario.
“I think that you can see, uh, certainly in the liquidity data, signs that China is definitely out of step. Uh, maybe moving almost exactly oppositely to where the US is.”
“That tight liquidity reinforces the debt problem in China. It creates debt deflation. The backdrop that we're now seeing in the Chinese economy is lacklustre growth. very, very weak inflation. if not, you know, disinflation or deflation.”
“And if you look at the Chinese government bond market, it's the only bond market where yields are dropping. Uh, and yields are down at 1.7%, which is a great contrast to everywhere else.”