Finance

Chinese smartphone and appliance maker Xiaomi announced late Thursday a new operating system — as it seeks to develop its ecosystem with the imminent release of its own car.
CEO and founder Lei Jun said on Chinese social media Wednesday that Xiaomi would release its car in the first half of next year. He did not specify whether it would be electric.
Chinese electric car company Nio this fall also released its own smartphone, based on Android but customized for greater integration with its vehicles.

The Xiaomi HyperOS logo is displayed on a smartphone.
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BEIJING — Chinese smartphone and appliance maker Xiaomi announced late Thursday a new operating system — as it seeks to develop its ecosystem with the imminent release of its own car.
Xiaomi shares rose more than 1% in Hong Kong trade Friday morning, building on gains of more than 20% for the year so far.

The new system, called HyperOS, is set to reach consumers Oct. 31 when Xiaomi’s latest phones, wearables and TV sets begin sales in China.
“The system marks a pivotal move forward in Xiaomi’s strategic vision of delivering the ‘Human x Car x Home’ smart ecosystem,” the company said in a release.
CEO and founder Lei Jun said on Chinese social media Wednesday that Xiaomi would release its car in the first half of next year. He did not specify whether it would be electric.

Tech companies have long sought to build customer loyalty with operating systems, such as Apple’s iOS and Google’s Android.
Chinese telecommunications giant Huawei developed its own operating system, called HarmonyOS, in a bid to replace Android. The company makes its own suite of smartphones, laptops, tablets and television sets, while selling the software for electric cars manufactured by partners.

In late September, Huawei claimed the latest version of its operating system had surpassed 60 million users. Overall, Huawei claims HarmonyOS now runs on more than 700 million devices.
Chinese electric car company Nio this fall also released its own smartphone, based on Android but customized for greater integration with its vehicles.

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Xiaomi rose to fame for its affordable smartphones and MIUI user interface, based on open source Android.
The company said the core of its new HyperOS system is “formed by Linux and Xiaomi’s self-developed Xiaomi Vela system.” The press release’s only mention of Android was that HyperOS allows for “more stable frame rate and lower power consumption” compared to the stock version of Android.
Xiaomi also touted HyperOS’s processing speed and security, and listed a number of ways in which a smartphone, car and laptop could easily share content and access each other’s cameras on the new system.
In recent years, Xiaomi has grown its appliance and consumer electronics business to account for about 22% of overall revenue in the second quarter, versus just under 37% for smartphones.
On Thursday, the company released a 3,999 yuan ($546) smartphone as well as a 1,999 yuan washing machine and a 2,999 yuan refrigerator. Xiaomi has an app for letting customers remotely control appliance settings.

Correction: This story has been updated to reflect that in late September, Huawei claimed the latest version of its operating system had surpassed 60 million users. More

Health savings accounts carry a three-pronged tax advantage.
To keep those tax breaks intact, consumers must use their HSAs for qualified health expenses.
Health insurance premiums generally don’t count.
There are some exceptions: People who are on Medicare, receiving unemployment benefits, paying for long-term care insurance or getting COBRA coverage can pay premiums with HSA funds.

Hoozone | E+ | Getty Images

What are HSAs?

HSAs carry a triple tax advantage: Account contributions are tax-free, as are investment earnings and withdrawals if used for qualified expenses.
Consumers can use HSA funds for a non-qualified purchase — but they’d lose a prong of the three-tiered tax benefit. A withdrawal would be taxed as income, similar to the way a pre-tax 401(k) or individual retirement account works.

In an ideal world, consumers would be able to fully fund their HSA each year and pay for current health costs out-of-pocket, leaving the accounts untouched until retirement, according to financial advisors.
“The compounding of earnings could fund all your health care when you’re old,” said Carolyn McClanahan, a physician and certified financial planner, based in Jacksonville, Florida.
But it’s not always possible to use HSAs that way — especially for lower and middle earners who may not be able to shoulder those expenses. HSAs are typically paired with high-deductible health plans which, depending on the plan, could generate big bills for medical care.
Here are four cases in which HSA funds can be applied to premiums:

1. COBRA premiums

Premiums for health-care continuation coverage such as COBRA count as a qualified expense, according to the IRS.
COBRA lets people who lose health benefits — due to circumstances like job loss, reduction in the hours worked, jobs transitions, death or divorce — continue their workplace health coverage on a temporary basis.

COBRA coverage typically allows consumers to keep the same health-care providers, but the coverage is often pricey.
When employed, workers generally only pay a share of the total premium, with the rest subsidized by their employer. With COBRA coverage, however, individuals may have to cover the full premium, up to 102% of the cost to the plan.
The total average premium for single coverage through a workplace plan in 2023 is $703 a month, or $8,435 a year, according to KFF, a nonprofit health data provider. For families, it’s $1,997 a month, or $23,968 a year.

2. Premiums while on unemployment

Health premiums paid by someone receiving unemployment compensation under federal or state law are also eligible.
These might be premiums for COBRA or a health plan purchased over an Affordable Care Act marketplace, for example.

3. Medicare premiums

Medicare premiums for people age 65 and older are also qualified, according to the IRS.
This would include premiums for Parts A (hospital insurance), B (medical insurance) and D (prescription drug coverage).
However, premiums for Medicare supplemental health policies — like Medigap plans — aren’t qualified.

ATU Images | The Image Bank | Getty Images

“The big mistake I see over and over is people thinking they can use HSAs for Medigap expenses,” McClanahan said.
Medicare beneficiaries don’t have to pay their premiums directly with an HSA to get the benefit. They can pay from their Social Security checks or from a bank account, for example, and reimburse themselves with their HSAs later, McClanahan said. Keep records and receipts of all these transactions, she advised.
There’s an additional caveat: If the HSA owner isn’t 65 years or older, then Medicare premiums for a spouse or a dependent who is 65 or older generally aren’t qualified, the IRS said.

4. Long-term care premiums

Consumers can also use their HSAs to pay for long-term care insurance premiums.  
There are dollar limits on qualified premiums on based on age. Here was the breakdown for 2022:

Age 40 or under — up to $450
Age 41 to 50 — $850
Age 51 to 60 — $1,690
Age 61 to 70 — $4,510
Age 71 or over—$5,640

The age corresponds to the person for whom the premiums were paid. The dollar limits are updated annually.
The insurance must be a “qualified long-term care insurance contract,” as defined in IRS Publication 502.
Ideally, consumers would pay out of pocket for their long-term care premiums before they retire, McClanahan said. However, it generally makes sense to use an HSA to pay these qualified premiums if they’re retired and now living off their savings, she said. More

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European Central Bank President Christine Lagarde is giving a press conference following the bank’s latest monetary policy decision.

The ECB ended its run of rate hikes on Thursday after 10 consecutive increases, keeping its key rate at a record high of 4%.
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Less than three weeks since Hamas plunged Israel into war, conflict is taking a toll on the country’s economy. The shekel has sunk to its lowest level against the dollar in more than a decade, prompting Israel’s central bank to sell $30bn of foreign-exchange reserves to prop up the currency. The price of insuring the country’s debt against default has rocketed. Firms from builders to restaurants have shut. On October 19th the finance ministry outlined plans to ramp up defence spending and provide for those pushed out of work. Four days later the central bank cut its growth forecast for the year from 3% to 2.3%.Since war is not just fought by military forces, but also by economic ones, an important question hovers over all this activity. Can Israel withstand the economic pain? The country’s clashes with Hamas since withdrawing from Gaza in 2005 do not provide much of a guide. In each case billions of shekels—a mere fraction of gdp—were spent on the military and repairs. The conflicts did not pose a threat to the country’s economy, which has long had one of the highest incomes per person in the Middle East.The scale of Hamas’s attacks on October 7th, and the likely ensuing conflict, is therefore pushing economists to the history books. In 1973 the cost of weapons and drafting 200,000 army reservists for the Yom Kippur war brought Israel to the brink of financial collapse. The country’s central bank reckons that, in 2002, a single year of intifada (Palestinian uprisings that ran intermittently from the late 1980s to the 2000s) cost 3.8% of gdp.To dodge disaster, Israeli officials must face up to three challenges. The first is employment. There are not enough workers to support both the economy and the war. Since October 7th the armed forces have mobilised more than 360,000 reservists, or 8% of the country’s workforce—a bigger call-up than in 1973. Most have left jobs, producing an enormous hole in the economy. Worse, the recruits are some of Israel’s most productive workers. Start-Up Nation, an Israeli charity, reckons that a tenth of tech workers have been called up. Workers in the industry are a quarter more productive than the average in the oecd club of mostly rich countries. By contrast, those in the rest of the economy are two-fifths less productive. Just a handful of reservists are from ultra-Orthodox communities in which employment is shunned.There is another source of labour shortages. Many of Israel’s low-skilled jobs are done by Palestinians from the West Bank, some 200,000 of whom work in either Israel or its settlements. But unrest in the West Bank means that many workers are not being allowed across the border, and they may begin to strike. During part of the second Palestinian intifada, which lasted from 2000 to 2005, missing Palestinian workers were one of the biggest brakes on Israeli growth, according to the imf.Moreover, there are few workers with which to replace reservists and Palestinians, since Israel’s labour market is ultra-tight. According to the central bank, which has spent the past few months raising interest rates to cool the economy, unemployment is at 3.2%. Strict labour laws mean that firms can only hire temporary replacements for those on military duty—not an attractive option. Investors worry about capital flooding away from “Silicon Wadi” and back to its Californian namesake. Start-Up Nation reckons that 70% of tech firms are struggling to function. The risk is that, when the war finishes, there will be fewer jobs to which to return.A second challenge for policymakers is the collapse of private consumption. Amid uncertainty and fear of repeat attacks, people have changed their consumption habits by staying at home. For nearly three weeks, restaurants and shopping malls have been empty. Those with the workers to open have discovered there are few customers. Tourism, Israel’s main business aside from tech, has screeched to a halt. Entire towns along the border with Gaza and Lebanon have been cleared out, putting a stop to economic activity. In order to support firms, all but the biggest businesses that suffer because of the war will receive covid-style grants to cover fixed costs. vat payments have been deferred. Workers who used to toil in areas now deemed unsafe will get handouts.That brings the final challenge for Israeli policymakers: managing the fiscal costs of conflict. Rescuing businesses, paying reservists and housing the population of entire villages in hotels will take its toll. An enormous increase in defence spending will be required in order to finance a ground invasion this year, and stock Israel with enough weapons to feel secure next year.Israel’s debt is currently at around 60% of gdp, a modest ratio for somewhere so rich. Even assuming that the war continues to the end of the year, it is forecast to rise to a mere 62%. The central bank has a healthy $170bn of foreign-exchange reserves. On top of this, America will help, assuming that President Joe Biden is able to unlock the $14bn he is asking for in military aid from Congress. Yet the longer the conflict continues, the more risks will grow. In 2024 Israel’s primary deficit is forecast to jump from 3% of gdp to 8%. The country’s economy had been on the rocks before Hamas’s attack. The government’s revenues were down by 8% in September, after a tough first eight months of the year. Now the cost of borrowing is rising and the tax base is crumbling. A longer war will mean more destruction, and reconstruction will not come cheap.Now or neverThe government will not be able to pay its way for ever, which is one reason why a chorus of local politicians insists that a ground invasion of Gaza ought to proceed straight away. Although, in the next few months, households and firms will receive generous financial support, conflict is draining labour, capital and expertise from Israel’s economy faster than it can be replaced. Other economies may have withstood far greater damage in pursuit of military victories in the past, but that will be little consolation to those forced to bear the costs in Israel this time around. ■Read more from Free exchange, our column on economics:Do Amazon and Google lock out competition? (Oct 19th)To beat populists, sensible policymakers must up their game (Oct 12th)To understand America’s job market, look beyond unemployed workers (Oct 5th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Superheroes are useless when times are good. If Gotham was a safe and pleasant place, Batman would probably just spend his days relaxing in a mansion upstate. Superman only ducks into a phone booth to reveal his blue-and-red lycra when the bad guys are holding someone up at gunpoint.For the best part of a decade, financial markets were mostly serene. The s&p 500 index, the leading measure of American stocks, climbed steadily higher from 2010 to 2020. With expected interest rates edging lower and lower, bond prices also floated mostly up. Investors worried about missing out on the bull market of a lifetime, not about whatever risks lay around the corner. The circumstances were thus abysmal for institutions that aim to be useful in turbulent times, such as hedge funds. They often seek returns that are uncorrelated with the broader stockmarket, in order to ease the blow an investor’s portfolio might take when markets fall. In volatile markets, a superhero manager—call him hedge-man—is supposed to swoop in and protect investors from losses.Hedge funds were a difficult sell for much of the 2010s. Investors stuck with them for the first half of the decade. But as returns continued to lag those of the stockmarket, net asset growth (a measure of whether investors are pulling money from or putting money into funds, stripping out the impact of investment returns) turned negative. In the second half of the decade, hedge funds bled money and hedge-man hung up his cape. In almost every year since 2015 more funds closed than opened.After a torrid decade, things are now looking better for hedge-man. Money has, on net, flowed into funds in every quarter this year. If business continues at the same pace, 2023 will be the best year for hedge funds since 2015. The total sum invested in funds is now more than $4trn, up from $3.3trn at the end of 2019. And this year more funds have opened than closed.What to make of hedge-man’s return? Maybe investors are heavily influenced by recent events. Last year hedge funds beat the market. The Barclays Hedge Fund Index, which measures returns across the industry, net of fees, lost a mere 8%, while the s&p 500 lost a more uncomfortable 18%. Yet hedge funds have in aggregate heavily underperformed American equity indices in all other years since 2009, returning an average of just 5% a year across the period, against a 13% gain for the broader market. In 2008 Warren Buffett, a famous investor, bet a hedge-fund manager $1m that money invested in an index fund would outperform that in a hedge fund of his choosing over the next decade. Mr Buffett won comfortably.The renewed enthusiasm for hedge funds might also suggest a deeper disquiet: perhaps people have become convinced the easy returns of the 2010s are now well and truly a thing of the past. Most investment portfolios have been buffeted by the end of easy monetary policy. As Freddie Parker, who allocates money to hedge funds for clients of Goldman Sachs, a bank, has noted, the performance of hedge funds tends to look healthier during periods of rising rates, as these are generally accompanied by a “more challenging environment” for asset returns. Hedge-fund performance has also been stronger during periods in which interest rates were high or volatile, such as the 1980s and mid-2000s.Of course, high interest rates do not necessarily mean the good old days are back for hedge-man. Today’s markets are higher-tech and lightning quick. Information spreads across the world just about instantaneously and is immediately incorporated into prices by high-frequency trading algorithms. By contrast, in the 1980s it was still possible to gain an edge on your rivals by reading the newspaper on the way into the office. Even though many hedge funds shut their doors in the 2010s, there are still far more around than there were in the 1980s or 1990s. Competition—for traders and for trades—is much stiffer than it was.It is understandable that, when faced with a world in which interest rates are high and volatile, investors seek the return of those who might spare them from peril. But consider how Mr Buffett’s bet played out. In 2008, a woeful year for stocks, his index was handily beaten by hedge funds. It was the outperformance over the following nine years that won him the wager. “It is always darkest before the dawn,” says Harvey Dent, a rival to Batman, in one of the films, “and, I promise you, the dawn is coming.” When it arrives, investors may wish they had stuck with their index funds.■Read more from Buttonwood, our columnist on financial markets: Why it is time to retire Dr Copper (Oct 19th)Investors should treat analysis of bond yields with caution (Oct 12th)Why investors cannot escape China exposure (Oct 5th)Also: How the Buttonwood column got its name More

As america unleashes a barrage of new protectionist measures under President Joe Biden, it continues to be dogged by past efforts—not least the tariffs on aluminium and steel that President Donald Trump thought necessary. These “section 232” levies, named after the trade act under which they were introduced, are scheduled to return to their original scope at the start of 2024, when a deal agreed by Mr Biden and the eu is due to run out.The deal allows the vast majority of eu exports to America to continue as before the tariffs. It was intended to give the two sides time to weld a comprehensive pact called the “Global Arrangement on Sustainable Steel and Aluminium” (gsa). This would, negotiators hoped, reduce excess capacity in steel markets and set out a joint way to decarbonise without crushing domestic producers. “These negotiations should be on the simpler end of the spectrum. They are only about two products, and America and the eu have a very similar profile in these industries,” says Todd Tucker of the Roosevelt Institute, a think-tank. But at a summit on October 20th the eu’s top brass and Mr Biden admitted that they needed more time to negotiate.image: The EconomistIt is not clear whether such an agreement will ever be struck, or whether, when it comes to excess capacity, it is even needed. Paul Butterworth of cru, a consultancy, notes that data from the oecd club of mostly rich countries shows that steel mills around the world are being used at the highest levels since 2000. In part, this is because China restructured its steel industry in 2017, killing unlicensed producers (see chart). Still, America and the eu have put in place an arsenal of measures to protect domestic markets from state-sponsored imports. Steel shipments from China to the eu have halved since 2015-16, and play hardly any role in America. Despite the harm such measures do, neither side wants to get rid of them altogether. European negotiators argue current policies are sufficient to resolve excess capacity, and are unwilling to commit to additional tariffs. American ones want more barriers.An agreement on carbon levies is an even more difficult task. The eu’s plan to tackle climate change is based upon a carbon price that applies to aviation, electricity generation and industry, and will soon cover more of the economy. The natural complement, its officials argue, is a tariff on the carbon content of imported steel and other high-energy goods in line with the eu carbon price. This is being introduced and the only exception will be for places that levy their own carbon prices—something most of America does not, and never will, do. It uses regulation and subsidies to push industry to be greener. Reconciling these two approaches into a common trade policy is a nightmarish task.The American proposal is for a club that levies a common carbon tariff on aluminium and steel, with higher tariffs for non-members. For its part, the eu would prefer a completely different sort of club, based on legally binding targets for decarbonisation and state-aid restrictions. Members of the club would be free to impose carbon tariffs, but only in line with the World Trade Organisation’s rules, which the eu believes would permit its border adjustment.In theory, then, both sides still want a gsa. Reality may be different. “The eu will now resort to what it knows best: damage control by continuing to negotiate and kicking the can down the road,” says David Kleimann of Bruegel, another think-tank. The result will probably be an extension of the current fix, and no agreement. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

For a long time, health care was eating the world. From 1950 to 2009 American spending on hospitals, medics and the like rose from 5% of gdp to 17%. Between the late 1970s and the mid-2010s British public spending on health rose by 4% a year in real terms, much faster than the economy’s growth of 2% a year. From 1980 to 2010 overall French prices rose by 150%; the price of caring for a sick or old person rose by 250%. Among economists, the proposition “health care’s share of gdp rises” was almost as close to an iron law as “free trade is good” or “rent controls do not work”.image: The EconomistThe iron has now melted. Even as populations age, and as the world continues to deal with the fallout from the covid-19 pandemic, health care is no longer taking over the economy. Across the rich world health care’s share of gdp jumped in 2020 and 2021, because of a combination of pandemic-related spending and lower gdp. However, it has since fallen back to close to its level in 2008 (see chart 1). Because of this “flattening of the curve”, health spending today is somewhere in the region of $2trn below its pre-2009 trend.In some countries the changes are still more dramatic. The ratio of health-care spending to gdp has fallen from its pre-covid peak in Australia and Sweden. In Norway it has tumbled by a remarkable 2.5 percentage points of gdp from its level in 2016. Even in America—the land of costly health care—something has changed. A new measure published by the Bureau of Economic Analysis suggests that the share of spending going on health care has been falling since before the pandemic. A widespread slowdown has never happened before. It has not even come close to happening.image: The EconomistInflation in the global health-care industry, which once looked Argentine, now looks rather more normal. Consider a broad measure of American health-care prices, which includes not only things purchased directly by consumers but also those paid for on their behalf, such as by insurers. From the 1970s to the 2000s annual inflation almost always exceeded the average (see chart 2). But in around 2010 that relationship flipped—and much the same is true elsewhere. Relative to the “gdp deflator”, an economywide measure of inflation, the deflator in health and social care across the rich world has pretty much stopped rising. In the 1990s Japanese health inflation soared relative to average prices, but has fallen since 2015. In the French health-and-social-care sector, once dreadful at cost control, prices now grow in line with the economywide average.To understand the significance of this development, consider some earlier warnings. “Put simply,” said President Barack Obama in 2009, “our health-care problem is our deficit problem.” In 2017 Britain’s fiscal watchdog cautioned that “excess cost growth” in health could add an additional 90% of gdp to Britain’s debt by the 2060s. Such statements now look a little outlandish, but few people saw this curve-flattening coming. What prompted it?Begin with supply-side factors. Falling health-care inflation is consistent with rising health-care productivity. Economists typically think productivity gains in health care are difficult to come by because the service is labour-intensive. It is, for example, unrealistic to expect a phlebotomist to draw a blood sample 3% faster, year after year. Typically this results in “cost disease”, where spending must rise over time in order for the service merely to stand still. After all, even if phlebotomists do not get more efficient, they still expect a pay rise every now and then—without them they may be enticed to other sectors. William Baumol, who identified this phenomenon, worried about health-care spending swallowing up an ever-larger share of gdp.At the same time, it never seemed plausible that health care was entirely immune to productivity gains. Even for an occasional patient it is blindingly obvious that health systems are ravaged by inefficiencies: paper-based forms instead of digital ones; hours spent filing insurance claims; different parts of the system not talking to one another. Meanwhile, some systems do seem to have improved. According to America’s Bureau of Labour Statistics, labour productivity in health care and social assistance fell by 13% between 1990 and 2000, but then made up all the lost ground from 2000 to 2019. In Britain, a study found that staff in the National Health Service (nhs) provided 17% more care pound for pound in 2016 than they did in 2004, compared with productivity growth of 7% in the economy as a whole. All this may have helped keep cost growth under control.Another supply-side factor—technological change—may also play a role. Over the long sweep of history, innovations have tended to raise health-care spending. This is in part because they often make therapies available for conditions that were previously impossible to treat. In the 1960s, for instance, the advent of dialysis machines was quite literally a life-saver for people suffering from kidney failure. And yet in the rich world the current cost of a year of dialysis for a patient is somewhere between $40,000 and $60,000, close to these countries’ per-person gdp.The nature of technological innovation in health care may now be changing. One possibility is that there has been a generalised slowdown in treatments that represent medical breakthroughs and are costly, such as dialysis. But this is difficult to square with a fairly healthy pipeline of drugs coming to market. Another possibility, which is perhaps more plausible, is that the type of advancements has changed, involving a shift from whizzy curative treatments to less glamorous preventive ones. There is decent evidence that the increased use of aspirin, a very low-cost preventative treatment, in the 1990s has cut American spending on the treatment of cardiovascular diseases today.A pill for the billDemand-side factors may also be keeping health-care spending in check. In America the Affordable Care Act (aca)—which was introduced in 2010, at about the time costs tailed off—tightened up the ways in which the government reimburses companies that provide treatment. The aca also made it more difficult for doctors to prescribe unnecessary treatments (seven expensive scans, perhaps, instead of one cheap one) in order to make more money.There are similar trends elsewhere. Following the global financial crisis of 2007-09, many cash-strapped European governments decided to reduce spending. This included limiting staff pay rises. The average basic earnings of British nurses are at least 10% lower in real terms than in 2010. Other governments have reduced spending by cutting services, sometimes to the bone. Take Greece, where the ratio of health spending to gdp is the same as it was in 2005. A paper published by the imf noted that, even before covid, the country’s health care was struggling, with “widening inequalities and large unmet needs, especially among the poor”.Other governments have saved money by replacing brand-name pharmaceutical offerings with generic equivalents. In the median European country for which there are data, generics take up 50% of the market by volume, up from 33% in 2010. After a patent on adalimumab, which is often known as “Humira” and is used to treat rheumatoid arthritis and other conditions, expired in 2018, the nhs saved around £150m ($200m) a year by bulk-buying non-brand versions of the drug.image: The EconomistAnother demand-side factor relates to overall economic growth. Health care is a “superior good”. When people get a dollar richer, they want more than a dollar more in health care—maybe demanding, say, mental-health care in addition to more traditional life-saving treatments. Across countries there is a strikingly strong relationship between prosperity and spending on health, even in places where the government provides the bulk of the health care (see chart 3). Americans spend so much on health because they are so much richer than almost everyone else.These days growth in income per person across the rich world is far slower than it was before 2008. According to our estimates, this explains 40-60% of the curve flattening. This part of the story is therefore a pyrrhic victory: health spending is not growing in part because the world has stopped getting much richer.How long will the curve stay flat? Spending is being pulled in different directions. An ageing population will continue to push up demand. In some countries the pandemic appears to have dealt a blow to health-care productivity, which may not yet have shown up in the data. On the other hand, America’s Inflation Reduction Act allows Medicare to use its purchasing power to bludgeon pharma companies into lowering prices. And economic growth remains weak. What is clear for now, though, is that the received wisdom is wrong. Health care need not eat 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. More

Using data provided by research firm Statista, CNBC analyzed the top nations overall when it comes to financial technology.
The U.S. is home to most valuable financial technology companies in the world in 2023, according to Statista data — but China isn’t far behind.
The U.S. was home to 65 of the top fintech companies, according to CNBC and Statista’s top 200 global fintechs list, while the U.K. was a distance second (15).
Britain is also second to the U.S. for the country with the highest number of fintech unicorns globally.

Chinese and US flags fly outside a hotel during a 2012 U.S. presidential election results event organized by the US embassy in Beijing on November 7, 2012.
Ed Jones | AFP | Getty Images

From the U.S. to China, countries around the world are battling it out to lead on financial technology, a heavily lucrative industry that has grown over the years taking everything from retail banking to wealth management online.
Since the 2008 financial crisis, thousands of new firms have been set up with the aim of taking on the financial incumbents and providing more accessible services to both consumers and businesses alike.

In the U.K., startups like Monzo and Starling took the banking world by storm with their digital-only offerings, while in China, Alibaba and Tencent launched their own respective mobile wallets, Alipay and WeChat Pay.

In August, CNBC, in partnership with Statista, launched a list of the world’s top fintechs. To choose the top global firms, Statista used a rigorous method that evaluated a few key business metrics and fundamentals, including revenue and number of employees.
Statista identified 200 of the top companies globally, across nine categories including neobanking, digital payments, digital assets, digital financial planning, digital wealth management, alternate financing, alternate lending, digital banking solutions, and digital business solutions.
Using additional data provided by Statista, CNBC analyzed the top nations overall when it comes to financial technology, splitting the analysis into three main areas of focus:

The countries with the most valuable fintech industries based on market capitalization.
Overall number of top fintech firms, as identified by Statista.
The amount of “unicorn” companies with valuations of $1 billion or more across different countries.

So, which countries are at the top of their game when it comes to fintech? In three charts, here’s what we found.

U.S., China home to most valuable fintechs

The U.S. is home to most valuable financial technology companies in the world in 2023, according to Statista data — but China isn’t far behind with mega-payments firms like Tencent and Ant Group making the country a solid second.
The valuation data is up to date as of April 2023, with the exception of Ant Group, Stripe, Nubank, Checkout.com, Revolut, Chime, Polygon, Rapyd, Ripple, Blockchain, and Plaid.
Combined, the U.S. produces the most value in terms of fintech, with eight of the top 15 highest-valued financial technology companies in the world worth a combined $1.2 trillion based stateside.
Visa and Mastercard are the two biggest fintech firms by market value, with a collective market capitalization of $800.7 billion.
China is home to the second-most highly valued fintech industry, with its financial technology giants worth a combined $338.92 billion in total market capitalization.

UK has second-biggest number of top fintech firms

The U.S. was home to 65 of the top fintech companies, according to CNBC’s list of world’s top 200 fintech companies. The U.K. was a close second with 15 of the top 200 fintech names globally, while the European Union is home to 55 top fintech companies.
The U.S. has a vibrant fintech market, not least thanks to its deep-pocketed investors.
Silicon Valley is a natural home for the sector given its storied history in birthing some of the world’s largest technology companies, like Apple, Meta, Google, and Amazon, and a well-established venture capital ecosystem with major players such as Sequoia Capital and Andreessen Horowitz present.
In the U.S., some of the top global fintech companies on Statista’s list include names like Stripe, PayPal and Intuit. These are all companies with significant shares in their respective markets and hallmark products used by thousands, if not millions, of businesses both big and small.
The U.K., similarly, has a prominent fintech industry.
Buoyed by forces many — from innovation-driven regulars like the Financial Conduct Authority, to growing pools of capital, including venture and private equity, to a government that has tried to rank fintech firmly high up on its agenda — the U.K. has managed to produce significant in the fintech world, from digital banking behemoth Monzo to listed payments firm Wise.
In China, which was another standout fintech player identified by Statista, the market for digital financial services is massive.
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Tencent’s WeChat Pay and Ant Group’s Alipay have cornered the market for mobile payments, providing ample competition to its fragmented, less built-up banking sector. Consumers in China tend to have a closer relationship with digital platforms like WeChat than they have with incumbent lenders.
But the fintech industry is faced with a number of challenges — not least macroeconomic headwinds.
Among the top roadblocks the sector faces right now, dwindling liquidity in venture capital is well up there.
In Europe, a combination of the Russian invasion of Ukraine, the aftermath of Covid-19 lockdowns, and resulting interest rate increases have impacted most major economies.
In the U.K., meanwhile, the technology industry’s problems generally have been compounded by Brexit, which critics argue is limiting foreign investment.
“The venture environment is generally struggling,” Nick Parmenter, CEO of business management consultancy Class35, told CNBC. “IPOs are fewer and lower in valuation, funds are struggling to raise from LPs and valuations are down throughout the venture cycle.”
“This makes raising growth capital a lot tougher, which makes management teams more conservative in their cash consumption. This has had a trickle-down effect on the fintech market — consumers have less discretionary income to invest or spend, which limits revenue potential for consumer-focused fintechs and small businesses alike.”

U.S. top for fintech unicorns, UK second

The U.K. again flexes its fintech muscles when it comes to the number of richly-valued “unicorn” companies in the country — Britain stands only second to the U.S., which hosts most of the world’s fintech unicorns. Unicorns are defined as venture-backed companies with a valuation of $1 billion or more.
In the U.K., some of the biggest unicorns include online banking startup Revolut ($33 billion) crypto wallet provider Blockchain.com ($14 billion), and digital payments groups Checkout.com ($11 billion), Rapyd ($8.75 billion) and SumUp ($8.5 billion).
Stateside, meanwhile, the largest fintech unicorns are Stripe ($95 billion), Chime ($25 billion), Ripple ($15 billion), Plaid ($13.5 billion), Devoted Health ($12.6 billion, and Brex ($12.3 billion).
Other leading ecosystems for fintech unicorns include India, on 17 unicorns, and China, on eight. France, Brazil and Germany each have six fintech unicorns.
Standing in 8th place is Mexico, with five fintech unicorns, Singapore, also with five, and the Netherlands, which has four in total.
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