The world economy achieved a “soft landing” as inflation fell mostly back to normal. So much for the past. As for the future, we expect the rich world’s debt binge to end in an inflationary mess and for AI to cause seismic economic and political disruption. We think that the global population will peak decades sooner than official projections. How are these predictions looking? It is, mostly, “too early to say”, as Zhou Enlai, communist China’s first premier, is misquoted as remarking when asked to assess the impact of French Revolution. Come back in another quarter of a century to see how we did. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//interactive/finance-and-economics/2026/07/02/is-the- economist-always-wrong

Finance & economics | Outflows in disguise China cracks down on rule-bending offshore investments It wants mainland investors to bet on its own tech dreams, not America’s July 2nd 2026 SOUNDWILL PLAZA in Hong Kong used to host a restaurant dedicated to the Transformers film franchise. The burger buns were stamped with robot faces and the gift shop featured a towering model of Optimus Prime (a robot that can transform into a lorry) striding through a portal. Last year, however, fast food gave way to fast finance. The site was taken over by Futu Securities, a tech-savvy brokerage with over 3.5m clients. Futu boasts it can open a new account in as little as three minutes—about the time it takes to flip a burger. When the flagship store opened in August, Futu was doing a lorry-load of business. But some of its client accounts have drawn the ire of the

authorities in mainland China, which maintains strict capital controls. In May they accused Futu and several similar brokers of offering services on the mainland without a licence. Futu faces a fine of some $271m and must close illegal accounts in two years. The price of its shares, listed on America’s Nasdaq Exchange, is down by a fifth since May 21st. The timing of the crackdown was unusual. In the past regulators have tightened capital controls when China’s exchange rate was looking wobbly. But the yuan has been one of the best-performing currencies in Asia over the past year (see chart). Its rise could erode the competitiveness of China’s exports, which have been propping up the economy’s growth. Capital outflows, which were large in March, have relieved that pressure on the currency. The crackdown will instead add to it. Regulators may fear they have no choice. China’s balance of payments may not always be as robust as it looks now. Higher prices for imported semiconductors are already eating into its trade surpluses. America’s Federal Reserve, under new management, is expected to raise interest rates at least once this year; China’s central bank might still have to cut. A widening rate gap will encourage more Chinese money to seek higher returns abroad. America’s towering tech debuts on the stock market have

already caught the jealous eye of Chinese investors. At the Lujiazui financial forum in Shanghai this month, some mainlanders grumbled about their exclusion from the recent SpaceX listing. (Futu is offering shares worth up to HK$1600, or $205, in Elon Musk’s rocketry firm as a bonus to new account-holders this month.) In a speech in Shanghai, Zhu Hexin of China’s State Administration of Foreign Exchange observed that capital flows have become more volatile. Investors’ money is also crowding in “future industries” like artificial intelligence and biomanufacturing, following a “tech narrative”. The government, he said, wants to ensure capital serves the “real” economy “while safeguarding the bottom line of security”. Mr Zhu insisted that China will still open up more fully to global capital, as stated in the country’s five-year plan released last year. But the government is keeping a closer watch on the doors investors use. New regulations on outbound investment, which came into effect on July 1st, broaden the definition of direct investments, vet them more rigorously for their national- security implications and subject them to ongoing monitoring even after the transaction is completed. Chinese officials are on their guard against the “Singapore wash” after Manus, a Chinese AI firm, reinvented itself as a Singaporean entity so that it could sell itself to Meta, only for China to then block the deal. Another trend is the “renminbification” or “renminbisation” of overseas assets—ugly and uglier words for raising the yuan’s global stature. Banks are encouraged to lend abroad in China’s currency, not dollars. This ought to ease some of the risks of opening up. Loans and deposits in yuan already account for almost 40% of Chinese banks’ foreign assets, up from less than 20% four years ago. The share “is substantial and increasing”, points out Alicia García-Herrero of Natixis, a bank. Every other outflow will be limited by quotas or “closed loops”. Mainlanders can, for example, buy a range of shares and bonds in Hong Kong through an official “connect” scheme. But when they buy the securities they pay brokers in yuan, not Hong Kong dollars. And when they sell, the proceeds are returned to them in the same currency, closing the loop. Approved institutional investors (including mainland banks, insurance

companies and securities firms) are also allowed to accumulate foreign financial assets, which they can then package into funds and other products for their clients. But their combined holdings are subject to a quota of $176bn. The limit has already been raised once this year, and Mr Zhu said it would be raised again. But it remains “tiny”, says Ms García-Herrero. China’s leaders like to build things, at home and abroad. They also like to see their national champions and national currency gain ground overseas. But they cannot shake the suspicion that capital outflows are “unpatriotic and damaging to the Communist Party’s prestige”, as Gabriel Wildau of Teneo, a consultancy, has put it. They do not want their citizens betting on foreign “tech narratives” that compete or conflict with their own vision of the future. If money is to stride out of China, it must pass through portals they approve of.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/28/china-cracks-down-on- rule-bending-offshore-investments

Finance & economics | A Bolivarian resolution Unpacking Venezuela’s peculiar debt restructuring Hazy numbers and the absence of the IMF make for an unusual negotiation July 2nd 2026 THE EARTHQUAKEs in Venezuela on June 24th are a humanitarian disaster. They are also an economic calamity. Estimates suggest damage of at least $10bn, equivalent to a tenth of Venezuelan GDP, already diminished by years of mismanagement and corruption. It could cost ten times that. To make matters worse, they struck just as the interim government of Delcy Rodríguez, installed after America deposed her predecessor and boss, Nicolás Maduro, is preparing to renegotiate the country’s $240bn or so in debt. A deal would help clear the path for economic recovery—if it can be pulled off.

This will not be straightforward. The restructuring will be among the largest in history. In nominal terms the combined debts of the government and PDVSA, the state oil firm, are comparable to those of Greece, which defaulted on $260bn in bonds in 2012. Relative to GDP, they are twice as large. The deal will also be peculiar. It involves a motley crew of creditors. And it does not involve the IMF—usually at the centre of sovereign restructurings. Moreover, observes Orlando Ochoa of the Oxford Institute of Energy Studies, a think-tank, “Two decades of administrative decay have depleted the skilled personnel required to navigate international financial negotiations.” Instead, the government is paying Centerview Partners, a Wall Street investment bank, a reported $150m to negotiate on its behalf. Those in line for a payout include bond-holders ($60bn) and those owed interest ($40bn), whose identity is uncertain after institutional investors sold off Venezuelan paper to distressed-debt funds; suppliers holding unpaid invoices ($30bn); companies such as ExxonMobil whose assets were expropriated under Mr Maduro’s predecessor ($20bn); bilateral creditors like China and Russia ($10bn-20bn); and development banks ($4bn). Even if the last two groups are excluded from this restructuring, as the government confirmed in May, it will be hard to align incentives. The IMF, which would normally help with such alignment, is increasingly distrusted by creditors and debtors alike. Its forecasts often look too rosy ahead of a crisis and too glum afterwards. Venezuela has not asked the IMF for money. Nor has it requested a debt-sustainability analysis, which the fund normally produces as an impartial arbiter. Instead, the government reportedly plans to release its own public-debt review in the coming weeks. Its impartiality will obviously be questioned. The legal terrain in Venezuela is also rocky. Some of the debt, issued by Mr Maduro’s government but not endorsed by the National Assembly, may not even be legitimate. American creditors, almost certainly owed a big slug of the debt, need the blessing of the Treasury Department, which has eased sanctions on Venezuela since recognising Ms Rodríguez’s government but not lifted them entirely.