Policy keeps borrowing costs low in China, but that is likely to change. We estimate by how much.

China’s investment-heavy economy has relied on cheap credit for a long time. Government policy, and how the economy is organized, have helped keep the cost of loans lower than if interest rates on debt were determined by economic fundamentals alone.

As China continues a transition toward a more liberalized financial system, the cost of debt looks set to rise. With the shifting policy outlook, what is the “natural rate of interest” for China – freed from policy guidance and other controls? And where are interest rates headed from here?

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Our Long-Term Capital Market Assumptions are part of a deeply researched proprietary process that draws on in-depth quantitative and qualitative inputs from experts across J.P.Morgan Asset Management. We, and many of our clients, rely on the output as a foundation for multi-asset class investing.

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