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China to buck the trend of rising equilibrium rates

In much of the world, interest rates are likely to settle at higher levels than was the case prior to the pandemic. But China is a key exception, with its shrinking population, slowing productivity gains, low inflation rate and increasingly-heavy debt burden putting it on a path toward ultra-low rates. We think the country’s short-term real equilibrium interest rate will fall from 1.4% currently to zero by 2030.

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