U.S. Federal Reserve Chair Kevin Warsh told G20 finance leaders on Monday that the global economy is undergoing a powerful investment surge that could lift growth and productivity, marking a sharp departure from the savings glut that characterized much of the past two decades.

Speaking at the G20 opening plenary in Asheville, North Carolina, Warsh said policymakers had moved into an environment in which abundant investment opportunities, particularly in artificial intelligence and infrastructure, are competing for capital that was once concentrated in low-yielding assets such as U.S. government bonds.

“If I were to try to characterize this moment, it would be one of a global investment surge,” Warsh said.

His comments came as investors grapple with a sustained rise in long-term borrowing costs across major economies. In the United States, the 10-year Treasury yield has climbed sharply, while the 30-year yield has moved above 5%, raising concerns about the cost of financing the government’s growing debt burden and the valuation of equities and other risk assets.

Warsh’s argument offers another explanation for the rise in Treasury yields beyond inflation, fiscal deficits, and monetary policy. If global savings are increasingly being directed toward productive investments, governments may have to offer higher returns to attract capital into sovereign debt.

The shift could have broader implications for the U.S. Treasury, which is competing for investors with a rapidly expanding pool of corporate debt used to finance data centers, semiconductor facilities, power infrastructure and other projects associated with the AI boom.

From Savings Glut to Investment Boom

Warsh contrasted the current environment with the “global savings glut” discussed by policymakers at G20 meetings before and after the 2008 financial crisis.

The savings glut, a concept prominently associated with former Fed Chair Ben Bernanke, helped channel large pools of global capital into safe assets, including U.S. Treasuries. Strong demand for government bonds helped suppress borrowing costs and contributed to relatively cheap financing for households and businesses.

Warsh said that dynamic may now be reversing.

The rise of AI and other capital-intensive technologies has created a new class of investment opportunities requiring enormous amounts of funding. Technology companies and hyperscalers are committing hundreds of billions of dollars to data centers, advanced chips, electricity generation and related infrastructure.

That development has created greater competition for the same pool of global capital traditionally available to sovereign borrowers.

However, it comes with significant implications for the Treasury. The U.S. government is already carrying more than $40 trillion of debt, increasing the amount of financing required from bond investors. If private-sector investment continues to absorb capital, Treasury yields may need to remain higher to attract sufficient demand.

Treasury Secretary Scott Bessent said in a Reuters interview on Sunday that stronger economic growth was one reason U.S. yields were elevated, while dismissing concerns about the stability of the Treasury market and the country’s debt burden.

Warsh also challenged assumptions that the U.S. and other advanced economies are locked into weak long-term growth.

He questioned whether traditional forecasts, including the Congressional Budget Office’s projection of roughly 1.8% annual growth, adequately capture potential improvements in productivity.

“The key question we have to ask is what’s the underlying growth potential, and in particular, what’s happening to productivity?” Warsh asked.

That question is central to the economic impact of AI. If businesses can use increasingly capable AI systems to produce more output with the same amount of labor and capital, productivity growth could accelerate, potentially allowing economies to expand faster without generating the same degree of inflationary pressure.

Warsh said the idea of secular stagnation, which holds that economies could face persistently weak growth because of inadequate investment opportunities and innovation, no longer fits the current environment.

The shift, however, creates a complicated policy backdrop for the Fed. Stronger productivity and investment could support economic growth, but a sustained investment boom could also keep demand for capital high and place upward pressure on long-term interest rates.

Inflation Remains The Fed’s Immediate Concern

Warsh’s comments at the G20 came just days after his keynote speech at the Fed’s annual Jackson Hole symposium, where he delivered his clearest indication yet that another increase in interest rates could become necessary if inflation does not move convincingly toward the Fed’s 2% target.

He said policymakers would have “more work to do” if they could not gain sufficient confidence that underlying inflation was moving toward the central bank’s objective.

The juxtaposition of his two speeches highlights the difficult balance facing the Fed. Warsh sees the potential for stronger productivity and investment to raise the economy’s long-term growth capacity, but he also wants to ensure that persistent inflation does not become entrenched.

For financial markets, that combination could mean higher-for-longer interest rates and elevated Treasury yields if stronger growth and investment keep demand for capital high while inflation remains above target.

It also means the traditional relationship between global savings and Treasury demand may be changing. If investors have more attractive opportunities in corporate bonds, AI infrastructure and other productive assets, the U.S. government may have to pay more to finance its deficits.

That could keep long-term borrowing costs elevated even if the Fed eventually lowers its short-term policy rate.

California and 11 other states have urged a federal judge to reject Paramount Skydance’s request for a $1.88 billion bond to offset the financial costs of delaying its proposed $110 billion acquisition of Warner Bros Discovery, escalating a legal battle that could determine the fate of one of Hollywood’s biggest deals.

In a court filing on Monday, California argued that any financial losses Paramount faces from the delay are largely of its own making, saying the company should not be allowed to shift those costs onto the states and the Writers Guild of America, which is also challenging the transaction.

The dispute centers on the consequences of the states’ antitrust lawsuit, filed on July 13 to block the merger. Paramount has asked the court to require the plaintiffs to post a $1.88 billion bond to compensate the company for losses if the deal is ultimately allowed to proceed after the litigation.

California Attorney General Rob Bonta said Paramount voluntarily accepted the financial risks associated with the transaction.

“Paramount now wishes to offload its responsibility,” Bonta said in the filing.

Paramount agreed to pay Warner Bros shareholders a so-called ticking fee of $7 million a day if the transaction remains incomplete after September 30. The payment begins October 1 and was part of the terms Paramount offered to persuade Warner Bros to abandon its earlier agreement with Netflix.

The states also pointed to Paramount’s decision to voluntarily refrain from completing the merger while the antitrust case is pending, or until June 1, 2027, whichever comes first.

Paramount has warned that the litigation could impose a substantial financial burden. The company estimates that by the time the trial concludes in March and final legal briefs are submitted in April, it could have paid roughly $1.3 billion in ticking fees to Warner Bros shareholders, money it says would not be recoverable.

The company argues that the states should bear some financial responsibility if their challenge ultimately fails.

“The states should not get a free pass,” Paramount said in a statement, arguing that plaintiffs should be required to post a bond to cover damages arising from the delay.

“Plaintiffs cannot have it both ways,” the company said, arguing that the states cannot seek to prevent the transaction from closing while avoiding responsibility for the costs of delaying it.

At the heart of the broader lawsuit is the competitive impact of combining Paramount and Warner Bros Discovery, which owns major film and television assets as well as streaming businesses. California and the other states argue that the merger would create a media giant with greater leverage over consumers and the ability to raise prices for film and television content.

The Writers Guild of America has separately sued to block the transaction, adding opposition from Hollywood’s creative workforce to the government’s antitrust challenge.

The case represents a major obstacle to Paramount CEO David Ellison’s strategy of transforming the company into a larger competitor to Netflix and Disney. A successful combination would bring together Paramount’s film and television operations with Warner Bros’ extensive entertainment portfolio, potentially reshaping the competitive landscape of the U.S. media industry.

Paramount maintains that the transaction has already cleared the principal regulatory hurdles outside the United States. The company said regulators in at least 68 countries have either approved the merger or declined to challenge it, leaving the U.S. litigation as the principal obstacle to closing.

Paramount has described the states’ lawsuit as “meritless” and said it remains confident the deal can be completed.

The bond dispute adds another layer of financial pressure to a transaction already facing a lengthy legal timetable. The court must now weigh whether the potential costs of delaying the merger should be protected through a bond while also determining whether the states’ antitrust case has sufficient grounds to prevent Paramount from completing the acquisition.

But the outcome could have consequences beyond the $1.88 billion bond request. If the court allows the deal to remain on hold through the litigation, Paramount faces mounting ticking fees and uncertainty over the transaction. If the court rejects the states’ challenge, the plaintiffs could face pressure to justify why Paramount should absorb billions of dollars in costs generated by a lawsuit that ultimately fails.

Shares of online fast-fashion retailer Shein ended almost unchanged in Hong Kong on Tuesday, in a muted debut that underscored investor concerns over slowing growth, rising trade costs and the weakening of the low-price advantage that helped propel the company to global prominence.

Shein shares closed at HK$48.50, compared with the HK$48.56 offer price, after falling as much as 10% earlier in the session. The closing price gave the company a market value of about $26.3 billion, a steep decline from its peak valuation of nearly $100 billion in 2022.

The lack of a first-day gain is notable in Hong Kong’s IPO market, where sought-after new listings can attract intense retail demand and generate substantial opening-day gains. Shein’s retail tranche was subscribed 5.63 times, while its international offering was 2.59 times subscribed, levels that indicate demand but fall well short of the exceptionally high oversubscription seen in some recent technology and robotics offerings.

The performance suggests investors are no longer willing to value Shein primarily on its extraordinary historical growth. Instead, they are assessing whether the company can preserve its business model as governments on both sides of the Atlantic dismantle the trade arrangements that helped make ultra-cheap cross-border fashion commercially viable.

Founded in China in 2012 and headquartered in Singapore since 2021, Shein spent years presenting itself as a global company while pursuing listings in the United States and Britain. Those efforts failed amid regulatory scrutiny, political concerns and opposition from Chinese authorities.

Its Hong Kong listing represents the culmination of a roughly four-year effort to access public markets and gives existing shareholders a route to liquidity after the company’s private-market valuation fell dramatically.

“As a new company listed in Hong Kong, we will continue to innovate, optimize, and cooperate with our supply chain partners for mutual benefit and win-win results,” Reuters quoted Shein Chief Financial Officer Leigh Gui as saying at the opening ceremony.

Shein’s central challenge is that the regulatory environment is increasingly targeting the very economics that made its model successful.

The company built its global business around inexpensive products shipped directly to consumers, allowing it to exploit low-value parcel exemptions and avoid some of the costs associated with conventional retail distribution.

The United States ended its de minimis duty exemption for e-commerce shipments worth less than $800 last year, while the European Union has also moved to impose fees on low-value packages. Higher tariffs, customs charges and logistics costs directly threaten Shein’s ability to maintain prices that have made it one of the world’s most recognizable fast-fashion platforms.

“Daily active users in Europe have fallen around 45% since the EU scrapped its duty exemption on small parcels, and Temu has seen a similar drop,” said Josh Gilbert, lead analyst for Asia-Pacific at eToro.

“This is less a Shein problem, but more so the end of an era for cheap cross-border shipping. The brand’s reach is unquestionable, but a large share of that loyalty has always belonged to the price tag.”

That matters for investors because Shein’s competitive advantage has not simply been its brand or fashion selection. Its model has been built around speed, massive product variety, and exceptionally low prices. If tariffs and shipping costs force prices higher, the company risks losing customers to competitors that operate through different supply-chain structures.

Shein’s financial performance is already showing the strain. Net income fell 39% last year, while the company swung to a loss in the first quarter. It has also warned that its first-half operating margin would be slightly below the first-quarter level because of higher customs duties, tariffs, fees and logistics costs in Europe and the Middle East.

Investors Question Valuation

The weak debut also indicates that Shein’s lower valuation may not yet be sufficient to compensate investors for the risks surrounding the business.

Charu Chanana, chief investment strategist at Saxo, said the stock was valued at about 15 times forward earnings, more than twice the multiple for PDD, the owner of rival Temu.

“I think the weak debut shows that even after the huge valuation reset, investors still don’t see Shein as obviously cheap,” Chanana said.

Investors are therefore being asked to pay a premium for a company facing greater uncertainty over growth, trade policy and regulation.

That is a significant change from the environment that produced Shein’s enormous private-market valuation. At its peak, investors were betting that the company’s algorithm-driven merchandising model and global reach could produce sustained rapid growth. The Hong Kong debut instead places a public-market value on a business that is entering a period of structural adjustment.

Shein Looks Beyond Ultra-Cheap Fashion

The company is responding by attempting to diversify its business rather than relying exclusively on its own ultra-low-cost clothing.

Shein has expanded its third-party marketplace, allowing other merchants to sell through its platform, and acquired U.S. apparel brand Everlane in May. The strategy could help the company build a broader retail ecosystem and reduce its dependence on the economics of shipping individual low-value parcels directly to consumers.

But diversification also introduces new challenges. Marketplace operations require Shein to compete with established e-commerce platforms, while branded fashion carries different cost structures and potentially weaker margins than the highly optimized fast-fashion model that made Shein successful.

The company also continues to face regulatory scrutiny. Shein has disclosed an ongoing investigation by the U.S. Federal Trade Commission that could result in significant penalties. The European Commission is examining issues including the sale of potentially illegal products, the potentially addictive design of its platform and the transparency of its recommendation systems.

Those investigations add another layer of uncertainty to a company already dealing with higher trade costs.

IPO Is Also About Existing Investors

The Hong Kong offering is considered not simply a mechanism for raising fresh capital. The transaction provides liquidity and helps restructure the ownership of a company whose early investors entered at substantially higher valuations.

Shein has agreed to make cash payments totaling about $3.5 billion and make share adjustments for some preferred shareholders.

The IPO itself represents only about 6.6% of Shein’s enlarged share capital. Cornerstone investors bought roughly one-fifth of the offering and are subject to a six-month lock-up, leaving only about 5% of the company freely tradable.

That relatively small public float can amplify price movements because a limited number of shares are available to trade. It also means Tuesday’s muted performance should not be interpreted as a complete verdict on Shein’s market value, particularly while a substantial portion of the shareholder base remains locked in.

Existing investors participating in the offering included Michael Bloomberg’s family office Willett Advisors, French investor Xavier Niel, Microsoft, Reliance Industries, Marcelo Claure’s Claure Group and SoftBank’s Vision Fund.

“This IPO is not just a fundraising event, it is also, and probably more of, a capital-structure event,” said Jianggan Li, CEO of consultancy Momentum Works.

Shein now has to prove that it can preserve the combination of low prices, rapid product turnover and global reach that drove its extraordinary expansion while absorbing a regulatory and cost environment that is becoming increasingly hostile to ultra-cheap cross-border e-commerce. Analysts see the flat Hong Kong debut as an indication that investors want evidence that Shein can make that transition before assigning the company a valuation closer to its former private-market heights.