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At least half of adults in a range of major economies said they were stressed about their personal finances, the International Your Money Financial Security Survey conducted by SurveyMonkey found.
Half of adults in Australia, Germany and the U.K. said they were worse off than they were five years ago.
Of adults who considered themselves middle class, between 45% and 62% said they were “living paycheck to paycheck.”

Roughly half of adults are stressed about personal finance, a new survey spanning various advanced economies found.
D3sign | Moment | Getty Images

At least half of adults in a range of major economies report being stressed about their personal finances, and say inflation is one of the main reasons.
A significant number also say they feel worse-off financially than their parents, and are pessimistic about their children’s financial futures, the International Your Money Financial Security Survey conducted by SurveyMonkey found.

In the U.S., Australia, Spain and Mexico, around 70% of adults said they were “very or somewhat stressed” about money. The percentage reduced slightly to 63% in the U.K., 57% in Germany, 55% in Switzerland, and roughly half of people in Singapore and France.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

Across those countries, between a half and two thirds of people said they considered themselves to be part of the middle class — except in the U.K., where it was a lower 37%.
Yet despite the middle classes traditionally being considered financially comfortable, between 45% and 62% of those who put themselves in that group described themselves as “living paycheck to paycheck.”

Half of adults in Australia, Germany and the U.K. said they were worse off than they were five years ago.
Meanwhile, of the countries surveyed, only adults in Singapore and Mexico were more likely than not to say they were better-off financially than their parents.

Inflation was widely cited as the source of financial stress, along with a lack of savings, economic instability and rising interest rates.
The study of 4,342 adults was carried out in March and released on Wednesday,
“The health of the global economy, though muted in some areas, is not being reflected in the perceptions of the average person … Despite the performance of the economy writ large, roughly half of adults are stressed about their personal finances in every country studied around the world,” said Eric Johnson, CEO of SurveyMonkey, in an accompanying article.
Global economic growth is slowing yet most developed economies have avoided the recessions that were forecast amid high inflation and interest rate hikes. Labor markets have proved resilient, but numerous surveys have suggested grim sentiment among consumers who have been hit hard by price rises in household bills and everyday goods. More

Cleveland Fed President Loretta Mester said Tuesday she still expects interest rate cuts this year but ruled out the next policy meeting in May.
Mester also thinks the long-run federal funds rate will be higher than the long-standing expectation of 2.5%. Instead, she sees the so-called neutral or “r*” rate at 3%.
San Francisco Fed President Mary Daly said that three reductions this year is a “very reasonable baseline” though she said nothing is guaranteed.

Cleveland Federal Reserve President Loretta Mester said Tuesday she still expects interest rate cuts this year, but ruled out the next policy meeting in May.
Mester also indicated that the long-run path is higher than policymakers had previously thought. Her fellow policymaker, San Francisco Fed President Mary Daly, also said Tuesday she expects cuts this year but not until there’s more convincing evidence that inflation has been subdued.

The central bank official noted progress made on inflation while the economy has continued to grow. Should that continue, rate cuts are likely, though she didn’t offer any guidance on timing or extent.
“I continue to think that the most likely scenario is that inflation will continue on its downward trajectory to 2 percent over time. But I need to see more data to raise my confidence,” Mester said in prepared remarks for a speech in Cleveland.
Additional inflation readings will provide clues as to whether some higher-than-expected data points this year either were temporary blips or a sign that the progress on inflation “is stalling out,” she added.
“I do not expect I will have enough information by the time of the FOMC’s next meeting to make that determination,” Mester said.
Those remarks come nearly two weeks after the rate-setting Federal Open Market Committee again voted to hold its key overnight borrowing rate in a range between 5.25%-5.5%, where it has been since July 2023. The post-meeting statement echoed Mester’s remarks that the committee needs to see more evidence that inflation is progressing toward the 2% target before it will start reducing rates.

Mester’s comments would seem to rule out a cut at the April 30-May 1 FOMC meeting, a sentiment also reflected in market pricing. Mester is a voting member of the FOMC but will leave in June after having served the 10-year limit.
Futures traders expect the Fed to start easing in June and to cut by three-quarters of a percentage point by the end of the year.
San Francisco Fed President Daly said that three reductions this year is a “very reasonable baseline” though she said nothing is guaranteed. Daly also is an FOMC voter this year.
“Three rate cuts is a projection, and a projection is not a promise,” she said, later adding, “We’re getting there, but it’s not going to be tomorrow, but it’s not going to be forever.”
While looking for rate cuts, Mester said she thinks the long-run federal funds rate will be higher than the long-standing expectation of 2.5%. Instead, she sees the so-called neutral or “r*” rate at 3%. The rate is considered the level where policy is neither restrictive nor stimulative. After the March meeting, the long-rate rate projection moved up to 2.6%, indicating there are other members leaning higher.
Mester noted the rate was very low when the Covid pandemic hit and gave the Fed little wiggle room to boost the economy.
“At this point, we are seeking to calibrate our policy well to economic developments so we can avoid having to act in an aggressive fashion,” she said.

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U.S. Securities and Exchange Commission chairman Gary Gensler testifies during a Senate Banking Committee hearing on Capitol Hill September 12, 2023 in Washington, DC.
Drew Angerer | Getty Images

The annual two-day “SEC Speaks” event kicked off Tuesday, offering clues to what the priorities will be for the Securities and Exchange Commission in the coming year.
Sponsored by the Practicing Law Institute, it is a forum where the SEC provides guidance to the legal community on rules, regulations, enforcement actions and lawsuits. The event allows the SEC to get its main messages across, and this year a key issue is “disclosure.”

“[W]e have an obligation to update the rules of the road, always with an eye toward promoting trust as well as efficiency, competition, and liquidity in the markets,” SEC Chair Gary Gensler said in his introduction to the conference. Besides Gensler, all the SEC division heads and senior staff will be speaking.
Based on Gensler’s introductory remarks, there will be discussions about the upcoming move to shorten the securities settlement cycle from two days to one (T+1, which takes place May 28), the expansion of the definition of an exchange to include more recent trading platforms (like request-for-quote, or RFQ, electronic trading platforms), consideration of a change in the current one-penny increment for quoting stock trades to sub-penny levels, creation of a best execution standard for broker-dealers, and creation of more competition for individual investors orders (so-called payment for order flow).

The SEC’s mission

You often hear SEC officials say the role of the SEC is to “protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.”
That sounds like a pretty broad mandate, and it is. Deliberately so. It came out of the disaster of the 1929 stock market crash, which was the initial event in the greatest economic catastrophe of the last 100 years: the Great Depression.
Prior to 1933, and particularly in the 1920s, all sorts of securities were sold to the public with wild claims behind them, much of which were fraudulent. After the crash of 1929, Congress went looking for a cause, and fraudulent claims and lack of disclosure were high on the list.

Congress then passed the Securities Act of 1933, and the following year passed the Securities Exchange Act of 1934, which created the SEC to enforce all the new laws. It also required everyone involved in the securities business (mainly brokerage firms and stock exchanges) to register with the SEC.
The 1933 Act did not make it illegal to sell a bad investment. It simply required disclosure: all relevant facts about an investment were supposed to be disclosed, and investors could make up their own minds.
The 1933 Act was the first major federal legislation to regulate the offer and sale of securities in the United States. This was followed by the Investment Company Act of 1940, which regulated mutual funds (and eventually ETFs), and the Investment Advisers Act of 1940, which required investment advisers to register with the SEC.

On the agenda

Tuesday’s conference is a chance for Gensler and his staff to tell everyone what they are doing in greater detail. The agency has six divisions, but they can be boiled down to disclosure, risk monitoring and enforcement.
Risk monitoring. To fulfill its mandate to protect investors, it’s critical to understand what the risks to investors are. There is an economic and risk analysis division that does that.
Disclosure. At the heart of the whole game is disclosure. That is the original requirement of the 1933 Act. The SEC has a division of corporation finance to make sure that Corporate America provides disclosures on issues that could materially affect companies. This starts with an initial public offering and continues when the company becomes publicly traded.
There’s also a division of examinations that conducts the SEC’s National Exam Program. It’s just what it sounds like. The SEC identifies areas of high concern (cybersecurity, crypto, money laundering, climate change, etc.) and then monitors Corporate America (investment advisers, investment companies, broker-dealers, etc.) to make sure they are in compliance with all the required disclosures. Current hot topics include climate change, crypto and cybersecurity.
The problem is that the definition of what should be disclosed has evolved over the decades. For example, there is a bitter legal fight brewing over the recent enactment of regulations requiring companies to disclose climate risks. Many contend this was not part of the original SEC mandate. The SEC disagrees, arguing it is part of the mandate to “protect investors.”
Enforcement. The SEC can use the information they gather to make policy recommendations, and if they feel a company is not in compliance, they can also refer them to the dreaded division of enforcement.
These are the cops. They conduct investigations into securities laws violations, and they prosecute the civil suits in the federal courts. This division will be providing an update on the litigation the SEC is involved in, which is growing.
Mutual funds, ETFs and investment advisers. We’ll also hear from the division that monitor mutual funds and investment advisers. Most people invest in the markets through an investment advisor, and they usually buy mutual funds or ETFs. This is all governed by the Investment Company Act of 1940 and the Investment Advisers Act of 1940. There’s a division of investment management that monitors all the investment companies (that includes mutual funds, money market funds, closed-end funds, and ETFs) and investment advisers. This division will be sharing insights on some of the new disclosure requirements that have been enacted in the past couple years, particularly rules adopted in August 2023 for advisers to private funds.
Trading. Finally, the division of trading and markets monitors everyone involved in trading: broker-dealers, stock exchanges, clearing agencies, etc. We can expect updates on record-keeping requirements, shortening the trading cycle (the U.S. goes to a one-day settlement from a three-day settlement on May 28, which is a big deal), and short sale disclosure.

Did we mention SPACs?

Donald Trump will likely not come up at the conference, but the SEC in January considerably tightened the rules around disclosure of special purpose acquisition companies, or SPACs. Trump’s company, Truth Social, went public on March 22 through a merger with a SPAC known as Digital World Acquisition Corp. It is now trading as Trump Media & Technology (DJT), and it made disclosures Monday that caused the stock to drop about 22%.
Prior to the recent rule changes, executives marketing a company to be acquired by a SPAC often made wild claims about the future profitability of these businesses — claims that would never have been possible to make had a traditional initial public offering route been used. The new SPAC rules that the SEC adopted made the target company legally liable for any statement made about future results by assuming responsibility for disclosures.
Additionally, companies are provided with a “safe harbor” protection when they make forward-looking statements, which provide them with protection against certain legal liabilities. However, IPOs are not afforded this “safe harbor” protection, which is why forward-looking statements in an IPO registration are usually very cautiously worded.
The rules clarified that SPACs also do not have “safe harbor” legal protections for forward-looking statements, which means the companies could more easily be sued.
Like I said, Trump will likely not come up at the conference, but the message: “Disclosure!” will likely be the dominant refrain. More

In a sign of how competitive China’s electric car market is, Xiaomi announced late Thursday that the SU7 would be priced at about $4,000 less than Tesla’s Model 3.
Li Auto and Nio both trimmed first quarter delivery forecasts in late March.
BYD remained the industry giant with 139,902 battery-powered passenger cars sold last month.

A Xiaomi SU7 electric sedan is seen displayed at a regional HQ of Xiaomi in Nanjing in east China’s Jiangsu province. 
Future Publishing | Future Publishing | Getty Images

BEIJING — Shares of Chinese smartphone maker Xiaomi surged as much as 16% on Tuesday, the first trading day since the company launched its SU7 electric car ahead of the Easter holiday.
Hong Kong-listed shares of Xiaomi touched 17.34 Hong Kong dollars on an intraday basis, its highest level since January 2022.

In a sign of how competitive China’s electric car market is, Xiaomi announced late Thursday that the SU7 would be priced at about $4,000 less than Tesla’s Model 3, and claimed the new car would have a longer driving range.
As of Tuesday morning, Xiaomi’s online store showed wait times of at least 5 months for a basic version of the SU7. The company had said it received orders for more than 50,000 cars in the 27 minutes since sales started at 10 p.m. Beijing time Thursday.

Chinese EV startups Xpeng and Nio announced car purchase subsidies Monday of 20,000 yuan ($2,800) and 10,000 yuan each, respectively. Nio said the promotional deal followed the Chinese government’s policy efforts to promote consumption with trade-ins.
The price reductions come as growth of new energy vehicles in the world’s largest auto market shows signs of slowing. Penetration of battery and hybrid-powered passenger cars has surpassed more than one third of new cars sold in China, according to the China Passenger Car Association.

Li Auto, most of whose cars come with a fuel tank to extend driving range, said Monday it delivered 28,984 cars in March. While up from February, the figure is below Li Auto’s recent delivery streak. The company in late March cut its first quarter delivery estimate by more than 20,000 vehicles.

Around the same time, Nio also trimmed its first quarter forecast by a few thousand cars. The company said Monday it delivered 11,866 cars in March.
Xpeng delivered even fewer cars last month, at 9,026 vehicles.
In contrast, Huawei’s new energy car brand Aito said it delivered 31,727 cars in March.
BYD remained the industry giant with 139,902 battery-powered passenger cars sold in March, and 161,729 hybrid vehicles sold during that time. BYD’s total passenger car sales last month rose by nearly 14% from a year ago. More

“Our ambition is for share repurchases to exceed our pre-acquisition level by 2026,” it said.
The new program comes after the completion of the 2022 buyback, which saw 298.5 million of it shares purchased.

UBS logo is seen at the office building in Krakow, Poland on February 22, 2024.
Jakub Porzycki | Nurphoto | Getty Images

UBS on Tuesday announced a new share repurchase program of up to $2 billion, with up to $1 billion of that total expected to take place this year.
“As previously communicated, in 2024 we expect to repurchase up to USD 1bn of our shares, commencing after the completion of the merger of UBS AG and Credit Suisse AG which is expected to occur by the end of the second quarter,” the bank said in a statement.

“Our ambition is for share repurchases to exceed our pre-acquisition level by 2026.”
The new program follows the completion of the 2022 buyback, during which 298.5 million of it shares were purchased. This represented 8.62% of its stock worth $5.2 billion, according to UBS.
The bank’s 2022 share repurchase program concluded last month.

Buybacks take place when firms purchase their own shares on the stock exchange, reducing the portion of shares in the hands of investors. They offer a way for companies to return cash to shareholders — along with dividends — and usually coincide with a company’s stock moving higher, as shares get scarcer.
UBS has undertaken the mammoth task of integrating Credit Suisse’s business, after announcing in late March 2023 that former chief Sergio Ermotti would return for a second spell as CEO.

Figures last week showed that Ermotti earned 14.4 million Swiss francs ($15.9 million) in 2023, following his surprise return. The bank in February reported a second consecutive quarterly loss on the back of integration costs, but continued to deliver strong underlying operating profits.
Shares are up more than 6% so far this year.
— CNBC’s Elliot Smith contributed to this article. More

Investor demand for exchange-traded funds is not slowing down, and firms without ETF offerings may risk losing business, according to one Goldman Sachs expert. 
Steve Sachs, global chief operating officer of Goldman’s ETF Accelerator, notes that despite the time and resources required to launch an ETF, not offering current and new investment strategies as ETFs may prove even more costly.

“Any number of our clients would tell you, the opportunity cost of not [offering ETF products] is greater,” he recently told CNBC’s “ETF Edge.”
If a firm does not have ETF offerings, Sachs thinks “eventually those assets are going to leave and go to a competitor that does.”
To help clients through the process of launching their own ETF products, Goldman Sachs created its ETF Accelerator, a digital platform that helps clients launch, list and manage their own ETF products. The accelerator launched in 2022 in response to what Sachs described as significant client demand.
“Our core institutional clients were calling and asking, ‘How do we get into this ETF space? How do we deliver our strategy, active and otherwise, in an ETF wrapper?'” he said.
According to Sachs, client inquiries about launching ETFs surged following the passage of SEC Rule 6c-11 in 2019, which intended to help these funds launch more efficiently.  

“While we wouldn’t call that a big boom, it was certainly a catalyst. The idea was it made it easier to launch an ETF, but it didn’t make it easy,” Sachs said. “At one point, we had more than 41 clients that had called us with exactly the same problem: ‘How do I do this, how do I move quickly and can you help us?'”
It can still take years to build the expertise, headcount and risk management framework necessary to launch an ETF, said Sachs. That is where Goldman’s accelerator platform aims to help.
“[It] allows our clients to come in, launch, list and manage their own ETF — but do it off of the technology, infrastructure and risk management expertise that Goldman’s known for and essentially get to market faster and cheaper than they could do it on their own,” Sachs said.
Since its inception, the accelerator has facilitated the launch of five ETFs. The most recent is Eagle Capital Management’s Select Equity ETF (EAGL), which listed last week. 
Other ETFs launched through the accelerator include GMO’s U.S. Quality ETF (QLTY) and three funds from Brandes Investment Partners: the Brandes Small-Mid Cap Value ETF (BSMC), U.S. Value ETF (BUSA) and International ETF (BINV).
“GMO, Brandes [and] Eagle Capital all felt that the journey to build it on their own would be too expensive and too long,” Sachs said. “They didn’t want to miss the opportunity cost of not delivering their investment strategies in the wrapper.”
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The Federal Reserve may have new incentives in the second quarter to cut rates deeper this year.
Canaccord Genuity’s Tony Dwyer thinks a deteriorating jobs market and easing inflation will ultimately push the Fed to act.

“I’m not saying that they have to go back to zero, but they have to be more aggressive,” the firm’s chief market strategist told CNBC’s “Fast Money” on Thursday. “One of the most aggressive topics that I talk to clients about is how bad the incoming data is.”
Dwyer contends falling employment survey participation rates are skewing the Bureau of Labor Statistics’ jobs report data. The next monthly jobs reading is due Friday.
“It’s not that they’re manipulating the data. The conspiracy theories go bananas with this stuff. It’s really that they don’t have a good collection mechanism. So, the revisions are significant and most of them have been negative now,” said Dwyer. “Our focus now is those rate cuts are what you need.”
At the March Federal Reserve policy meeting on interest rates, officials tentatively planned to slash rates three times this year. They would be the first cuts since March 2020.
Dwyer expects the rate reduction will give financials, consumer discretionary, industrials and health care stocks a boost. The groups are positive this year.

“Our call is to buy into the broadening theme on weakness rather than simply adding to the mega-cap weighted indices. The top 10 stocks still represent 33.7% of the total SPX [S&P 500] market capitalization,” he wrote in a recent note to clients. “History shows that is historically high and doesn’t last forever.”
According to Dwyer, market performance will become much more even by the end of this year into 2025.

‘It’s not just the Mag 7’

“It’s coming from a broadening of the earnings growth participation. It’s not just the Mag 7,” he told “Fast Money.”
The “Magnificent Seven,” which is made up of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, is outperforming the broader market this year — up 17% while the S&P 500 is 10% higher.
The S&P 500 closed at a record high on Thursday and just posted its strongest first quarter gain in five years.
“When you’re this overbought and this extreme to the upside, you just want to wait for a better opportunity,” Dwyer said. “In our view, that comes with there is worsening employment data that cuts rates. You have to worry about the economy. That’s when I want to go in.”
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Last year Xi Jinping, China’s leader, paid a visit to Heilongjiang in the country’s north-east. Part of China’s industrial rustbelt, the province exemplifies the problems besetting China’s economy. Its birth rate is the lowest in the country. House prices in its biggest city are falling. The province’s GDP grew by only 2.6% in 2023. Worse, its nominal GDP, before adjusting for inflation, barely grew at all, suggesting it is in the grip of deep deflation.Never fear: Mr Xi has a plan. On his visit, he urged his provincial audience to cultivate “new productive forces”. That phrase has since appeared scores of times in state newspapers and at official gatherings. It was highlighted in last month’s “two sessions”, annual meetings of China’s rubber-stamp parliament and its advisory body. In the preface of a new book on the subject, Wang Xianqing of Peking University likens the term to “reform and opening up”, the formula that encapsulated China’s embrace of market forces after 1978. Those words “shine” even today, he wrote, implying that “new productive forces” will have similar staying power.What do the shiny words mean? Chinese officials are hunting for ways to power the country’s economy. For many years its productive forces drew on the mobilisation of labour and accumulation of capital. The country’s workforce grew by 100m people from 1996 to 2015. Its stock of capital rose from 258% of GDP in 2001 to 349% two decades later, according to the Asia Productivity Organisation, a think-tank. After the global financial crisis of 2007-09, much of this capital accumulation took the form of new property and infrastructure.China’s workforce is now shrinking and demand for property has slumped: fewer people are moving to China’s cities, speculative gains on real estate are no longer assured and potential homebuyers are reluctant to buy flats in advance in case distressed developers run out of cash before building is complete. The property downturn has hurt consumer confidence and deprived local governments of crucial revenues from land sales. Even after China abandoned its strict covid-19 controls, the economic recovery has been muted and uneven. Spending has not been strong enough to fully employ China’s existing productive forces. As a consequence, according to one measure, deflation has persisted for three quarters in a row.Chart: The EconomistAt China’s stage of development, economies typically pivot towards services. But the government’s heart lies elsewhere. The pandemic boosted demand for China’s manufactured goods, from surgical masks to exercise bikes. America’s export controls on “chokepoint technologies” have also created a need for homegrown alternatives, from lithography machines to aviation-grade stainless steel. China’s 14th five-year plan, which spans 2021-25, promised to maintain manufacturing’s share of GDP, which had declined from almost a third in 2006 to just over a quarter in 2020 (see chart).In its quest for a sophisticated, yet self-contained, manufacturing system, China has long employed a variety of helpful policies. Its Ministry of Education, for example, recently approved a new undergraduate concentration in high-end semiconductor science and engineering. China’s spending on more explicit industrial policies, including subsidies, tax breaks and cheap credit, amounted to 1.7% of GDP in 2019, according to the Centre for Strategic and International Studies, a think-tank—more than three times the percentage spent by America.“What China really wants to be is the leader of the next industrial revolution,” says Tilly Zhang of Gavekal Dragonomics, a consultancy. That will require it to upgrade traditional industries, break foreign strangleholds on existing technologies and forge a new path in industries of tomorrow. Although the central government’s ambition is impressive, even unsettling, it cannot succeed without the help of local governments, which are short on cash, and private entrepreneurs, who are short on confidence. As such, the new slogan may betray a damaging hyperopia—long-sightedness that is blinding the leadership to more immediate economic concerns.The owl spreads its wingsTo Barry Naughton of the University of California, San Diego, who confesses to reading some Hegel in his younger days, the phrase “new productive forces” evokes the “dialectical” idea that an accumulation of quantitative changes can result in a qualitative break or sudden leap, as Hegel put it, like when an incremental increase in temperature turns water into steam. Marx, meanwhile, noted that when new productive forces achieve sufficient weight in the economy, they can remake the social order: “The handmill gives you society with the feudal lord,” he wrote, “the steam-mill, society with the industrial capitalist.” New productive forces, then, can be a big deal.But in presenting the concept, Mr Xi has said that the test for new productive forces will be improvements in “total factor productivity”, a term lifted not from Marx, but from mainstream economics. It refers to increases in output that cannot be attributed to increases in measurable inputs, such as capital, labour and human capital. In mixing Marxist and neoclassical concepts, new productive forces is a “strange hybrid beast”, says Mr Naughton.According to Mr Xi, the new productive forces will flow from the application of science and technology to production. The phrase is a signal that China’s technology push should be even more ambitious than it is today and more tightly integrated into economic production. China’s leaders have promised a “whole of nation” effort to boost technological self-reliance. The central government’s budget, unveiled in March, increased spending on science and technology by 10%, to 371bn yuan ($50bn), the largest percentage increase of any division. Frugal innovation, this is not.Nor is it China’s first assay at the problem. In 2006 a 15-year plan set national targets to increase research-and-development (R&D) spending, cut dependence on foreign technology and lift technology’s contribution to growth. It also identified 16 “megaprojects”, such as building China’s own large passenger aircraft and landing a probe on the moon. These were largely attempts to replicate existing technologies. In 2010, after the global financial crisis, China changed tack, lavishing some of its heavy stimulus on a variety of “strategic emerging industries”, including new kinds of information technology, renewable energy and electric vehicles (EVs)—many of which were still embryonic.Six years later, China shifted emphasis again. Its “innovation-driven development strategy” expressed faith that the world was in the midst of another industrial revolution. Advances in digital technologies, the internet of things, green technologies and artificial intelligence (AI) promised breakthroughs across swathes of the economy. Rather than pick a miscellany of emerging industries, China’s new strategy emphasised this cluster of mutually reinforcing technologies. China aimed to become a “world power” in innovation by the middle of this century. By 2020 it was spending almost 2.9trn yuan (2.8% of GDP) on science and technology, according to Rhodium Group, a consultancy. The government’s contribution exceeded 60% if generous tax breaks are included. Of the recipients, a sixth ended up with universities or research institutes. Roughly 60% flowed to companies.Mr Naughton has called China’s innovation strategy “the greatest single commitment of government resources to an industrial policy objective in history”. What does the country have to show for it? The results have so far been better than any middle-income country could expect. But they are not quite as impressive as China’s leaders might have hoped.In e-commerce, fintech, high-speed trains and renewable energy, China is at or near the technological frontier. The same is strikingly apparent in EVs, success with which helped China last year become the world’s biggest exporter of cars. In a list of 64 “critical” technologies identified by the Australian Policy Research Institute, a think-tank, China leads the world in all but 11, based on its share of the most influential papers in the fields. The country is number one in 5G and 6G communications, as well as biomanufacturing, nanomanufacturing and additive manufacturing. It is also out in front in drones, radar, robotics and sonar, as well as post-quantum cryptography.White heatChina has also made good progress in broader measures of a country’s innovation “ecosystem”. The Global Innovation Index, published by the World Intellectual Property Organisation, combines about 80 indicators, spanning infrastructure, regulations and market conditions, as well as research effort, patent awards and citation counts. A middle-income country with China’s GDP per person would expect to rank in the 60s. China ranks 12th.The economic impact of these achievements is harder to measure. China’s list of “strategic emerging industries” has kept evolving since its introduction in 2010, making it tough to track progress. Two members of China’s National Bureau of Statistics once lamented that the criteria for inclusion, especially at the level of products, are “vague”. How to know if a boiler counts as “energy saving” or a composite material counts as “high performing”? Nonetheless, China’s statisticians estimate that strategic emerging industries accounted for 13.4% of GDP in 2021, up from 7.6% in 2014 but below the original target for 2020 of 15%. By comparison, the value added by property building and services (ignoring upstream links to steel, iron-ore and other such industries) was about 12%.Although these gains are impressive, China’s leaders are not content. They have been alarmed both by America’s technological embargoes and its recent technological triumphs. Sweeping export controls on the sale of chips and chipmaking equipment have revealed China’s dependence on foreign components, software and equipment. America’s advances in AI have also prompted reflection. AI was an industry in which China thought it had an edge. The country’s leaders were shocked by the introduction in 2022 of ChatGPT, a large language model developed by OpenAI.China’s progress has also been hurt by its own leaders. They cracked down heavily on many of China’s leading tech companies in 2021, accusing them of mishandling data, thwarting competition and exploiting gig workers. This regulatory storm targeted consumer-facing “platform” companies, such as Alibaba and Meituan, rather than advanced manufacturers or other firms in “hard tech”. However, the damage to investor confidence was hard to contain. The disfavoured platform companies, with their huge troves of data, are also leading investors in many frontier technologies, such as AI, that China’s leaders are keen to foster. The country’s big internet firms cut their R&D spending by almost 7% in the first half of 2023, compared with a year earlier, according to Rhodium.Total-factor productivity growth—Mr Xi’s preferred test of new productive force—has also slowed. China’s tech programme introduced in 2006 implied that its contribution to growth should rise to 60%. Instead, it has fallen to less than a third, according to calculations by Louis Kuijs of S&P Global Ratings, a credit-rating agency. China is thus suffering from its own version of the “Solow paradox”: you can see a new technological age everywhere but in the productivity statistics. These setbacks and shortcomings may explain the perceived need for a fresh slogan to shake things up.The country’s innovation push now seems split into three. It is determined to replicate “chokehold” technologies that the rest of the world might seek to deny it. A second goal is to invent technologies the rest of the world has yet to create. In January the ministry of science and technology, along with six other ministries, issued a list of “future industries”, many of which are even more pathbreaking than the strategic emerging industries of the past. They include photonic computing, brain-computer interfaces, nuclear fusion and digital twins—digital simulacra of patients that doctors can monitor for illnesses that might arise in their real-life counterparts. China’s government is encouraging laboratories and research institutes to spend more than half of their basic research money on scientists under 35 years of age, in the belief they are more likely to make the breakthroughs the country needs.These moonshots could be seen as a folly China can ill afford—a distraction from the dogged pursuit of self-reliance, which requires homegrown versions of technologies that China can no longer count on importing from abroad. But according to Ms Zhang of Gavekal, China’s leaders hope that futuristic industries will contribute indirectly to the country’s technological sovereignty by giving it “bargaining chips” in the tech battles ahead. If America threatens to cut off China’s access to a vital input, China can retaliate in kind.Round the bendChinese commentators often talk about “overtaking at the curve”. China’s success in EVs, following its longstanding failure to displace incumbent makers of traditional vehicles, demonstrates that it can sometimes be easier to make advances in fields that are not already occupied by well-entrenched incumbents. According to Jie Mao of the University of International Business and Economics in Beijing and his co-authors, China’s science-and-technology policies from 2000 to 2012 boosted productivity the most in industries in ferment, rather than industries that had reached maturity either at home or abroad. In fighting a guerilla war, Mao Zedong famously believed in occupying the countryside before advancing on the cities. In the same way, China may be marching into wilder and woollier areas of technological discovery, where its long entrenched adversaries have a smaller advantage.A third objective is to upgrade existing industries. “Even the most traditional agriculture can form new productive forces,” Wang Yong of Peking University has argued, so long as it employs revolutionary technologies. He cites automated planting or selective breeding using big data. At the two sessions, the annual meetings of China’s parliament and its advisory body, a delegate from a prominent state-owned distillery even argued that the new productive forces can be found in hard spirits.The pursuit of these goals will be expensive. One lesson of the past ten to fifteen years is that large quantities of money cannot guarantee a Hegelian transformation of production. But a lack of spending will surely preclude one.It must therefore worry China’s leaders that local governments’ budgets are stretched and animal spirits are low. In the past, much of the money for China’s tech push has come from local-government funds that raise money from land sales and “special bonds”. Their revenues fell by more than a fifth from 2020 to 2023.When the economy is booming and local authorities are flush with cash, they are at liberty to invest in ventures that might not pay off for five or ten years, points out Matt Sheehan of the Carnegie Endowment for International Peace, a think-tank. In 2010, for example, growth was rebounding and stimulus money could flood into EVs, solar panels and other evolving technologies. But for local governments in today’s more straitened times, “economic firefighting is going to end up overwhelming attempts to think long term,” he predicts. Companies will be urged to invest in projects that offer short-term payoffs. They may also be pestered and harassed for taxes and fees to help their provincial or municipal patron balance its books.At this year’s two sessions, Li Qiang, China’s prime minister, set out the country’s “major tasks” for the year ahead. First on Mr Li’s list was “to modernise the industrial system” and develop “new quality productive forces”. Expanding domestic demand, which is necessary to dispel deflation, ranked only third. If the mood and markets do not revive, local governments will struggle to refill their coffers and private investment may fall short. Mr Xi is determined to reinvent China’s economy. To do so, he needs to reinflate it first. ■ More