A China Resources property under construction in Nanjing, Jiangsu province, China, Sept 24, 2024.
Cfoto | Future Publishing | Getty Images
BEIJING — China’s slowing economy needs more than interest rate cuts to boost growth, analysts said.
The People’s Bank of China on Tuesday surprised markets by announcing plans to cut a number of rates, including that of existing mortgages. Mainland Chinese stocks jumped on the news.
The move may mark “the beginning of the end of China’s longest deflationary streak since 1999,” Larry Hu, chief China economist at Macquarie, said in a note. The country has been struggling with weak domestic demand.
“The most likely path to reflation, in our view, is through fiscal spending on housing, financed by the PBOC’s balance sheet,” he said, stressing that more fiscal support is needed, in addition to more efforts to bolster the housing market.
The bond market reflected more caution than stocks. The Chinese 10-year government yield fell to a record low of 2% after the rate cut news, before climbing to around 2.07%. That’s still well below the U.S. 10-year Treasury yield of 3.74%. Bond yields move inversely to price.
“We will need major fiscal policy support to see higher CNY government bond yields,” said Edmund Goh, head of China fixed income at abrdn. He expects Beijing will likely ramp up fiscal stimulus due to weak growth, despite reluctance so far.
“The gap between the U.S. and Chinese short end bond rates are wide enough to guarantee that there’s almost no chance that the US rates would drop below those of the Chinese in the next 12 months,” he said. “China is also cutting rates.”
The differential between U.S. and Chinese government bond yields reflects how market expectations for growth in the world’s two largest economies have diverged. For years, the Chinese yield had traded well above that of the U.S., giving investors an incentive to park capital in the fast-growing developing economy versus slower growth in the U.S.
That changed in April 2022. The Fed’s aggressive rate hikes sent U.S. yields climbing above their Chinese counterpart for the first time in more than a decade.
The trend has persisted, with the gap between the U.S. and Chinese yields widening even after the Fed shifted to an easing cycle last week.
“The market is forming a medium to long-term expectation on the U.S. growth rate, the inflation rate. [The Fed] cutting 50 basis points doesn’t change this outlook much,” said Yifei Ding, senior fixed income portfolio manager at Invesco.
As for Chinese government bonds, Ding said the firm has a “neutral” view and expects the Chinese yields to remain relatively low.
China’s economy grew by 5% in the first half of the year, but there are concerns that full-year growth could miss the country’s target of around 5% without additional stimulus. Industrial activity has slowed, while retail sales have grown by barely more than 2% year-on-year in recent months.
Fiscal stimulus hopes
China’s Ministry of Finance has remained conservative. Despite a rare increase in the fiscal deficit to 3.8% in Oct. 2023 with the issuance of special bonds, authorities in March this year reverted to their usual 3% deficit target.
There’s still a 1 trillion yuan shortfall in spending if Beijing is to meet its fiscal target for the year, according to an analysis released Tuesday by CF40, a major Chinese think tank focusing on finance and macroeconomic policy. That’s based on government revenue trends and assuming planned spending goes ahead.
“If general budget revenue growth does not rebound significantly in the second half of the year, it may be necessary to increase the deficit and issue additional treasury bonds in a timely manner to fill the revenue gap,” the CF40 research report said.
Asked Tuesday about the downward trend in Chinese government bond yields, PBOC Gov. Pan Gongsheng partly attributed it to a slower increase in government bond issuance. He said the central bank was working with the Ministry of Finance on the pace of bond issuance.
The PBOC earlier this year repeatedly warned the market about the risks of piling into a one-sided bet that bond prices would only rise, while yields fell.
Analysts generally don’t expect the Chinese 10-year government bond yield to drop significantly in the near future.
After the PBOC’s announced rate cuts, “market sentiment has changed significantly, and confidence in the acceleration of economic growth has improved,” Haizhong Chang, executive director of Fitch (China) Bohua Credit Ratings, said in an email. “Based on the above changes, we expect that in the short term, the 10-year Chinese treasury bond will run above 2%, and will not easily fall through.”
He pointed out that monetary easing still requires fiscal stimulus “to achieve the effect of expanding credit and transmitting money to the real economy.”
That’s because high leverage in Chinese corporates and households makes them unwilling to borrow more, Chang said. “This has also led to a weakening of the marginal effects of loose monetary policy.”
Breathing room on rates
The U.S. Federal Reserve’s rate cut last week theoretically eases pressure on Chinese policymakers. Easier U.S. policy weakens the dollar against the Chinese yuan, bolstering exports, a rare bright spot of growth in China.
“Lower U.S. interest rates provide relief on China’s FX market and capital flows, thus easing the external constraint that the high U.S. rates have imposed on the PBOC’s monetary policy in recent years,” Louis Kuijs, APAC Chief Economist at S&P Global Ratings, pointed out in an email Monday.
For China’s economic growth, he is still looking for more fiscal stimulus: “Fiscal expenditure lags the 2024 budget allocation, bond issuance has been slow, and there are no signs of substantial fiscal stimulus plans.”
Leading analyst Craig Moffett suggests any plans to move U.S. iPhone assembly to India is unrealistic.
Moffett, ranked as a top analyst multiple times by Institutional Investor, sent a memo to clients on Friday after the Financial Times reported Apple was aiming to shift production toward India from China by the end of next year.
He’s questioning how a move could bring down costs tied to tariffs because the iPhone components would still be made in China.
“You have a tremendous menu of problems created by tariffs, and moving to India doesn’t solve all the problems. Now granted, it helps to some degree,” the MoffettNathanson partner and senior managing director told CNBC’s “Fast Money” on Friday. “I would question how that’s going to work.”
Moffett contends it’s not so easy to diversify to India — telling clients Apple’s supply chain would still be anchored in China and would likely face resistance.
“The bottom line is a global trade war is a two-front battle, impacting costs and sales. Moving assembly to India might (and we emphasize might) help with the former. The latter may ultimately be the bigger issue,” he wrote to clients.
Moffett cut his Apple price target on Monday to $141 from $184 a share. It implies a 33% drop from Friday’s close. The price target is also the Street low, according to FactSet.
“I don’t think of myself as the biggest Apple bear,” he said. “I think quite highly of Apple. My concern about Apple has been the valuation more than the company.”
Moffett has had a “sell” rating on Apple since Jan. 7. Since then, the company’s shares are down about 14%.
“None of this is because Apple is a bad company. They still have a great balance sheet [and] a great consumer franchise,” he said. “It’s just the reality of there are no good answers when you are a product company, and your products are going to be significantly tariffed, and you’re heading into a market that is likely to have at least some deceleration in consumer demand because of the macro economy.”
Moffett notes Apple also isn’t getting help from its carriers to cushion the blow of tariffs.
“You also have the demand destruction that’s created by potentially higher prices. Remember, you had AT&T, Verizon and T. Mobile all this week come out and say we’re not going to underwrite the additional cost of tariff [on] handsets,” he added. “The consumer is going to have to pay for that. So, you’re going to have some demand destruction that’s going to show up in even longer holding periods and slower upgrade rates — all of which probably trims estimates next year’s consensus.”
According to Moffett, the backlash against Apple in China over U.S. tariffs will also hurt iPhone sales.
“It’s a very real problem,” Moffett said. “Volumes are really going to the Huaweis and the Vivos and the local competitors in China rather than to Apple.”
Apple stock is coming off a winning week — up more than 6%. It comes ahead of the iPhone maker’s quarterly earnings report due next Thursday after the market close.
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In a year that hasn’t been kind to many big-name stocks, Warren Buffett’s Berkshire Hathaway is standing near the top. Berkshire shares have posted a 17% return year-to-date, while the S&P 500 index is down 6%.
That performance places Berkshire among the top 10% of the U.S. market’s large-cap leaders, and the run has been getting Buffett more attention ahead of next weekend’s annual Berkshire Hathaway shareholder meeting in Omaha, Nebraska. It’s also good timing for the recently launched VistaShares Target 15 Berkshire Select Income ETF(OMAH), which holds the top 20 most heavily weighted stocks in Berkshire Hathaway, as well as shares of Berkshire Hathaway.
“It’s a really well-balanced portfolio chosen by the most successful investor the world has ever seen,” Adam Patti, CEO of VistaShares, said in an appearance this week on CNBC’s “ETF Edge.”
Berkshire’s outperformance of the S&P 500 isn’t limited to 2025. Buffett’s stock has tripled the performance of the market over the past year, and its 185% return over the past five years is more than double the performance of the S&P 500.
Berkshire Hathaway is one of 2025’s top performing stocks.
In addition to this long-term track record of success in the market, Berkshire Hathaway is getting a lot of attention right now for the record amount of cash Buffett is holding as he trimmed stakes in big stocks including Apple, which has proven to be a great strategy. The S&P 500 has experienced extreme short-term volatility since President Donald Trump’s inauguration on January 20. Even after a recent recovery, the S&P is still down 8% since the start of Trump’s second term.
“The market has been momentum driven for many years, the switch has flipped and we’re looking at quality in terms of exposure, and Berkshire Hathaway has performed incredibly well this year, handily outperforming the S&P 500,” said Patti.
Berkshire Hathaway famously doesn’t pay a dividend, with Buffett holding firm over many decades in the belief that he can re-invest cash to create more value for shareholders. In a letter to shareholders in February, Buffett wrote that Berkshire shareholders “can rest assured that we will forever deploy a substantial majority of their money in equities — mostly American equities.”
The lack of a dividend payment has been an issue over the years for some shareholders at Berkshire who do want income from the market, according to Patti, who added that his firm conducted research among investors in designing the ETF. “Who doesn’t want to invest like Buffett, but with income?” he said.
So, in addition to being tied to the performance of Berkshire and the stock picks of Buffett, the VistaShares Target 15 Berkshire Select Income ETF is designed to produce income of 15% annually through a strategy of selling call options and distributing monthly payments of 1.25% to shareholders. This income strategy has become more popular in the ETF space, with more asset managers launching funds to capture income opportunities and more investors adopting the approach amid market volatility.
People shop for produce at a Walmart in Rosemead, California, on April 11, 2025.
Frederic J. Brown | Afp | Getty Images
A growing number of Americans are using buy now, pay later loans to buy groceries, and more people are paying those bills late, according to new Lending Tree data released Friday.
The figures are the latest indicator that some consumers are cracking under the pressure of an uncertain economy and are having trouble affording essentials such as groceries as they contend with persistent inflation, high interest rates and concerns around tariffs.
In a survey conducted April 2-3 of 2,000 U.S. consumers ages 18 to 79, around half reported having used buy now, pay later services. Of those consumers, 25% of respondents said they were using BNPL loans to buy groceries, up from 14% in 2024 and 21% in 2023, the firm said.
Meanwhile, 41% of respondents said they made a late payment on a BNPL loan in the past year, up from 34% in the year prior, the survey found.
Lending Tree’s chief consumer finance analyst, Matt Schulz, said that of those respondents who said they paid a BNPL bill late, most said it was by no more than a week or so.
“A lot of people are struggling and looking for ways to extend their budget,” Schulz said. “Inflation is still a problem. Interest rates are still really high. There’s a lot of uncertainty around tariffs and other economic issues, and it’s all going to add up to a lot of people looking for ways to extend their budget however they can.”
“For an awful lot of people, that’s going to mean leaning on buy now, pay later loans, for better or for worse,” he said.
He stopped short of calling the results a recession indicator but said conditions are expected to decline further before they get better.
“I do think it’s going to get worse, at least in the short term,” said Schulz. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”
The loans, which allow consumers to split up purchases into several smaller payments, are a popular alternative to credit cards because they often don’t charge interest. But consumers can see high fees if they pay late, and they can run into problems if they stack up multiple loans. In Lending Tree’s survey, 60% of BNPL users said they’ve had multiple loans at once, with nearly a fourth saying they have held three or more at once.
“It’s just really important for people to be cautious when they use these things, because even though they can be a really good interest-free tool to help you kind of make it from one paycheck to the next, there’s also a lot of risk in mismanaging it,” said Schulz. “So people should tread lightly.”
Lending Tree’s findings come after Billboard revealed that about 60% of general admission Coachella attendees funded their concert tickets with buy now, pay later loans, sparking a debate on the state of the economy and how consumers are using debt to keep up their lifestyles. A recent announcement from DoorDash that it would begin accepting BNPL financing from Klarna for food deliveries led to widespread mockery and jokes that Americans were struggling so much that they were now being forced to finance cheeseburgers and burritos.
Over the last few years, consumers have held up relatively well, even in the face of persistent inflation and high interest rates, because the job market was strong and wage growth had kept up with inflation — at least for some workers.
Earlier this year, however, large companies including Walmart and Delta Airlines began warning that the dynamic had begun to shift and they were seeing cracks in demand, which was leading to worse-than-expected sales forecasts.