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Chinese deflation? A risk for 2019

Inflation concerns give way to worries about Japanese-style price stagnation

| China
Is China now heading for Japan-style deflation?   © Reuters

What a difference a year makes when you are trading Chinese bonds.

Twelve months ago, dealers in China's $2 trillion government debt market braced for a wipeout. Ten-year yields surged above 4% amid worries overly loose monetary policy might fan inflation. That, in turn, fueled fears of a wave of corporate defaults. Now, the opposite risk may be at play: deflation.

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