a brighter path
2022 has been an eventful and volatile year. despite the many challenges the market has faced and will continue to face, material progress has been made in china’s financial reform agenda. we look forward to a brighter 2023 with optimism.
the year 2022 has been a challenging one for markets worldwide. the year started with expectations that the pandemic was finally fading，and the world could be on a v-shaped recovery. markets believed that the fed would be patient，and 10y ust yielded 1.5% at end-2021. however，fast-rising inflation forced western central banks to raise interest rates aggressively despite a slowing economy. the russia-ukraine conflict，now in its ninth month，has added to market volatility and fueled an energy crisis in europe. as we approach 2023，equity and bond indices are down 15-20% or more and 10y ust now stands at 3.8%.
china，being the world’s second largest economy and the largest trading nation，is not immune to these global macroeconomic and geopolitical factors. unlike many of its peers in the us，europe，and emerging markets，however，the people’s bank of china (pbc) has not been hiking interest rates. the country’s cpi inflation has remained low and the central bank has taken an accommodative stance to support growth. liquidity was kept abundant and market rates were guided lower. the 10-year chinese government bond rate stood at 2.8% in mid-november，similar to the level at end-2021.
