Shard Capital warns China risks deflationary trap as debt load mounts
FXI•Shard Capital’s September 2026 review warned that China risks a deflationary trap as demand weakens despite exports climbing nearly 15%. Retail sales rose 1.1% in the first eight months, while fixed-asset investment fell 7.7%.
1. Demand and investment
Shard Capital’s review flagged a two-speed economy, where middle-class consumers trading down are fueling price wars that squeeze corporate profits. It outlined possible policy shifts toward demand stimulus, stronger social safety nets or explicit monetary reflation to lift money velocity.
2. Market moves
The brief also said European markets fell almost 5% in U.S. dollar terms, the S&P 500 slipped 0.35%, silver plunged 13%, and the Vanguard Long-Term Treasury ETF dropped as much as 5%.
