circuits in May, for example, were up by some 70% year on year in dollar terms. That rise was entirely due to higher chip prices. China’s overdependence on exports has been clear for some time. Many analysts therefore hope its leaders will turn again to fiscal stimulus to lift domestic spending. Meanwhile, the opposite is happening. The government is stumbling into “de facto austerity”, as Xiangrong Yu and Xinyu Ji of Citigroup, a bank, have put it. Tax revenues have grown strongly in recent months. From January to May the authorities gathered 6.2% more in value-added tax and 12.2% more in personal-income taxes than they did a year before. Thanks to energetic trading in China’s stock markets, stamp duties also brought in far more than usual, rising by 89%. Some of this reflects the return of inflation, which increases the nominal value of purchases, boosting VAT. The tax authorities have also put more effort into enforcement. Since last year, for instance, automated text messages have instructed taxpayers to declare all their overseas income and assets going back to 2022. So although the central government is spending more, it is also collecting more. The budget deficit, combining central and local governments, has narrowed a little over the past 12 months. That is the opposite of what stimulus requires—and of what a weak economy needs. The mix of fiscal spending has also changed in counterintuitive ways. China’s leader, Xi Jinping, champions high-tech manufacturing, calling on entrepreneurs and local officials to cultivate “new productive forces”. He has also warned in the past against “welfarism”, arguing that handouts can make people lazy. You might assume, then, that public spending had drifted towards technology and education and away from social safety-nets.
But as Citi’s economists point out, the emerging fiscal “pecking order” seems instead to favour social security (which includes pensions, unemployment insurance, anti-poverty handouts and efforts to put people back to work). These items’ share of the government’s main budget has grown in recent years (see chart 2). The slice devoted to technology and education has remained steady, and the share ploughed into infrastructure has declined. This picture does not capture everything. It leaves out China’s state-owned enterprises. It also excludes special government funds, which have their own missions and money. Nonetheless, the numbers reveal some fiscal home truths. In a weak economy and an ageing society, the humdrum demands of the elderly, the unemployed and the poor will always make their presence felt, whatever the leader’s preferences. Chinese technology may be white- hot. But its economy is cooling. And its population is increasingly grey.■ 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/2026/07/15/chinas-trade-gap-is- narrowing-and-other-surprises
Finance & economics | Taskmaster Can Kevin Warsh’s Fed force 5 reimagine monetary policymaking? The new chairman enlists heavy-hitters to fight a handful of gnarly problems July 16th 2026 FEDERAL RESERVE chairs like to leave a mark. Ben Bernanke, in charge during the global financial crisis of 2007-09, ushered in a formal inflation target and changed how the Fed talked to the world by making its deliberations less opaque. In 2015 his successor, Janet Yellen, raised interest rates after seven years near zero. Jerome Powell, who came next, launched the Fed’s first comprehensive review of its monetary-policy framework. Kevin Warsh, the new chair, also has big ideas. One is to limit how much of its internal deliberations the Fed reveals, on the grounds that public pronouncements subsequently may make it harder for policymakers to revise
their views. Another is to subject the Fed to more open external scrutiny. To that less controversial end, on July 9th Mr Warsh announced the formation of five task-forces which will review critical areas of monetary policy. Such brains trusts are not a new idea. In 2014 Mr Warsh, who served as a Fed governor in the financial crisis, was himself invited by the Bank of England to join one reviewing its communication practices. But whereas his predecessors at the Fed have always listened to leading figures in academic economics, business and finance behind closed doors, Mr Warsh has handed them a microphone. Each task-force is led by a trio of notables. The one looking at how the Fed communicates includes two former central-bank presidents (from Brazil and Britain). A fellow ex-head (from India) co-chairs the team examining the Fed’s bloated balance-sheet. The former boss of Walmart, America’s biggest supermarket, will help run the group investigating alternative data sources. The group exploring the impact of artificial intelligence on jobs and productivity is co-led by an eminent Stanford University economist on secondment to Anthropic, a top AI lab, an even more eminent Silicon Valley venture capitalist and a Microsoft executive. A Nobel prizewinner is among the trio leading the task-force on understanding the causes of inflation. These heavy-hitters will, with the help of Fed staffers, cobble together policy recommendations and present these first to the Fed board and then to the public. If things go smoothly, all this will happen by the end of the year. Going smoothly will, first of all, require reconciling the co-chairs’ often divergent opinions in their areas of expertise. Consider the team tasked with reviewing how the Fed thinks about inflation. Thomas Sargeant of New York University, who won the Nobel prize in 2011 for empirical work on cause and effect in the macroeconomy, is an unabashed fan of inflation targets. William White of the C.D. Howe Institute, a Canadian think-tank, is an equally staunch critic, arguing that targets have played a role in making the world more indebted and exacerbated financial boom-bust cycles. Greg Mankiw of Harvard University, who headed the Council of Economic Advisers under President George W. Bush, is in favour of targets but against spuriously precise ones like the Fed’s 2.0%.
Sparks may likewise fly in the other teams. The possible exception is the one concerned with AI. All its members are, like Mr Warsh, bullish on the technology’s transformative potential, differing only in the degree of bullishness (from the gung-ho venture capitalist, Marc Andreessen, to the more guarded Asha Sharma of Microsoft and Chad Jones, a respected academic economist). Each also has an interest in promoting an optimistic outlook, given their ties to the tech industry. They must nevertheless, like their opposite numbers on the other teams, persuade the Fed to take their recommendations seriously—the second prerequisite for the smooth completion of Mr Warsh’s effort. In most cases, notably on the Fed’s balance-sheet and inflation targeting, the conclusions would need the consent of the Fed board or the Federal Open Markets Committee (FOMC), on which Mr Warsh has just one vote out of seven and 12, respectively, to become policy. Mr Bernanke famously spent hours discussing proposed changes to which economic forecasts the Fed would publicise, and sought a thumbs-up even from the FOMC’s handful of non-voting members. Given this culture of collegiality, Mr Warsh will have to build consensus around the five sets of conclusions. He will also need to decide how to communicate those conclusions to the world.■ 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/2026/07/16/can-kevin-warshs-fed- force-5-reimagine-monetary-policymaking
Finance & economics | Buttonwood What investment gurus get wrong To see a country’s financial follies, look to its celebrity advisers July 16th 2026 FINANCIAL ADVICE was once doled out solely by well-paid professionals, and solely to the wealthy. Then, from the 1980s, celebrity advisers took their tips to large radio and TV audiences, especially in America. Today legions of social-media “finfluencers” spout off recommendations to anyone, anywhere. As in previous decades, the recommendations of investment gurus—how to cut expenses, build a savings fund or avoid scams—are sensible and universal. Beyond the shared basics, though, their counsel differs in telling ways. They may not know it, but they hold up a mirror to their countries’ financial mores, resisting audiences’ vices or accidentally reinforcing them.
In America no young finfluencer yet matches the stature of Dave Ramsey, a gruff 65-year-old radio star turned podcaster. Much of his advice—offered in a stern, fatherly style—is evergreen, built around emergency funds, sensible saving and buying shares for the long term. Mr Ramsey’s guidance, however, is puritanical in its attitude to debt. Sensibly, he urges listeners to pay off high-interest consumer debts early. But he also suggests that anyone already saving for retirement or children’s education should pay off their mortgages as fast as possible, too—even low- interest loans secured before 2022. The rigid advice is in part a reaction against Americans’ proclivity to spend, spend, spend beyond their means. Even in periods of strong economic growth many households find themselves in financial distress through debt. In the first quarter of 2026, 13% of credit-card balances were 90 days or more overdue, close to the record high from 2010, following the global financial crisis. Britain’s undisputed heavyweight financial guru is Martin Lewis, the founder of “Money Saving Expert”, a website. He channels a different failing: an aversion to investment. Mr Lewis’s stock-in-trade is practical penny-pinching: supermarket bargains, introductory offers and the benefits of switching banks or utility providers. By his own account, until recently he barely touched the stock market. Only in the past year has he turned his attention to Britain’s individual savings accounts for shares, a generous scheme that allows people to invest up to £20,000 ($26,700) per year without incurring the usual investment taxes. The attitude of Mr Lewis reflects the bleak reality that many Brits own barely any equities. A measly 13% of the financial assets of British households are shares, the lowest in almost any large developed economy. In Ramseyan America the figure is 44%. No amount of scrimping and saving will compensate Britons for missing out on the profound benefits of long- term compound returns. Asian personal-finance sages often pepper advice with research on individual stocks. Rachana Phadke Ranade, a chartered accountant with 5.4m YouTube followers, is one of India’s most prominent finfluencers. Her