DealBook: China Feels the Weight of the Trade War

The engines of China’s growth continue to sputter, according to the nation’s latest economic figures, Bloomberg News reports.

• China’s industrial output rose 4.7 percent from a year earlier, below an estimate of 5.4 percent.

• Retail sales grew by 7.2 percent, compared with a forecast of a 7.8 percent increase.

• And fixed-asset investment grew by 5.2 percent in the first 10 months — the lowest rate since 1998.

“The disappointing numbers show China off to a rough start in the final three months of 2019,” Reuters writes, “and will bolster calls for Beijing to roll out fresh support after third quarter growth slowed to its weakest in almost three decades, with factory production bruised by the trade war with Washington.”

And things could still get worse if President Trump’s threat to introduce 15 percent tariffs on a further $156 billion worth of Chinese-made goods were to go ahead on Dec. 15. There are hopes that the extra tariffs could be averted by a so-called Phase 1 trade deal with China, but Mr. Trump affirmed this week that they could yet be deployed if China does not accede to his trade terms.

What happens now? “We’re in sort of a dangerous moment because both sides feel they have the upper hand,” William Reinsch, a former senior U.S. Commerce official, told Reuters. “But I don’t think the talks have collapsed.”

More trade news: Economists think a U.S.-China truce is unlikely in 2020. And Mr. Trump said again that he wanted a $100 billion trade deal with Turkey.


Today’s DealBook Briefing was written by Andrew Ross Sorkin, Gregory Schmidt and Jamie Condliffe.


WeWork’s rapid expansion caused the company’s losses to more than double in the third quarter, which helps explain why its planned I.P.O. imploded so suddenly, writes Peter Eavis in the NYT.

The company reported a loss of $1.25 billion in the three months that ended in September. That was up from $497 million in the same period a year earlier, according to a company presentation, which was obtained by the NYT. Revenue increased about 94 percent, to $934 million.

“They knew the bulk of this and kept the public in the dark,” said Vicki Bryan, C.E.O. of Bond Angle, a research firm.

WeWork’s appetite for growth cost it hundreds of millions of dollars. At the end of September, the company had $2 billion in cash, the presentation said, down from $3 billion in total cash at the end of June. That implies that it burned through $1 billion of cash in three months, Mr. Eavis writes.

Other details from the presentation:

• WeWork had enough members in September to fill the equivalent of 79 percent of available desks at the company’s locations, down from 84 percent a year earlier.

• At the end of September, WeWork had 625 locations, an 87 percent increase from a year earlier. It is now in 127 cities, up from 83.

More: WeWork’s India franchise is looking to raise $200 million — and says it is “isolated” from the U.S. company’s failed I.P.O.

The search giant is teaming up with two banks, Citigroup and the Stanford Federal Credit Union, to begin offering a “smart checking” account next year, Stacy Cowley and Tara Siegel Bernard of the NYT report.

• Google says it will help bank customers “benefit from useful insights and budgeting tools.”

• It isn’t seeking a banking charter: For instance, the Stanford Federal Credit Union will offer co-branded accounts, with Google developing the user interface and the credit union still handling all the banking functions.

• The exact features offered by its smart checking account are so far unconfirmed.

Google isn’t the only tech company interested in banking and payments. Apple is championing its own credit card in partnerships with Goldman Sachs, while Facebook unveiled a new digital payment system this week and is trying to revolutionize the world of global finance with its own cryptocurrency project. They are all attracted by the prospect of a new revenue stream, as their business models, based on areas like data collection and smartphone sales, begin to look less robust.

What’s less clear is whether customers want their banking provided by Big Tech. “For a new product or service to succeed, it has to offer something new and shiny enough to motivate consumers to leave their existing provider,” Ms. Cowley and Ms. Siegel Bernard write. And fears about financial data privacy are probably a concern for consumers, too.

Disney’s new streaming service is already a runaway success: It has 10 million users and counting, according to the company.

What we don’t know so far, Edmund Lee of the NYT points out, is how many of those are free trials from Disney’s tie-up with Verizon — customers of the carrier’s unlimited data plans get a free yearlong subscription — versus full-price buy-ins.

That could be important: Verizon is thought to be paying a wholesale rate to Disney for those accounts, of around $3 per subscription per month, Mr. Lee notes, so the revenue from them is lower. And “those folks could churn out after a year if they notice it on their bills” when their free trial ends, he adds.

But the markets loved the news, regardless of the uncertainty, with Disney’s stock rising by more than 7 percent.


Senator Elizabeth Warren has said her proposed wealth tax would raise nearly $3 trillion for the U.S. government over a decade. But a new analysis of the plan suggests that it could reduce economic growth by nearly 0.2 percentage points a year over that same period, writes Jim Tankersley in the NYT.

If the proceeds Ms. Warren estimates went toward reducing the federal debt, annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade, according to an assessment from the Penn Wharton Budget Model.

Here’s how it compares to previous predictions, according to Mr. Tankersley:

“Penn Wharton estimated in 2017 that President Trump’s tax cut would increase economic growth by roughly 0.06 percentage points per year over a decade.”

“Its estimate of Ms. Warren’s policy implies the wealth tax would have an effect that is three times as large as the Trump tax cuts — but in the opposite direction.”

But the analysis does not accurately account for the economic benefits from the new government spending programs that Ms. Warren would fund with the tax revenue, say economists who favor the plan.

The House of Representatives opened formal impeachment hearings yesterday, for only the third time in modern history, Nicholas Fandos and Michael Shear report in the NYT.

The first public witnesses in the impeachment inquiry were Bill Taylor, the top American diplomat in Ukraine, and George Kent, a senior State Department official.

Mr. Taylor further implicated President Trump in a campaign to pressure Ukraine to commit publicly to investigating Joe Biden, the former vice president and a Democratic presidential candidate. Mr. Taylor described his growing sense of alarm at learning that $391 million in vital military aid for Ukraine had been held up by the campaign.

• “It was illogical. It could not be explained. It was crazy,” Mr. Taylor said.

Mr. Kent assailed what he called a “campaign to smear” American officials serving in Ukraine.

• “Those attacks undermined U.S. and Ukrainian national interests and damaged our critical bilateral relationship,” he said.

Mr. Trump’s defenders raged against the process, calling it unfair and illegitimate, while dismissing Mr. Taylor and Mr. Kent as part of a “politicized bureaucracy,” Mr. Fandos and Mr. Shear write.

But both witnesses rejected attempts by Republicans and Democrats to draw them into a partisan debate over the impeachment inquiry.

More: Mitch McConnell, the Senate majority leader, said that he would not prevent an impeachment trial in the Senate. MSNBC called on a surprise guest for coverage of the hearing: George Conway, the conservative lawyer, frequent Trump critic and husband of the Trump adviser Kellyanne Conway.

The Weill Family Foundation, which is led by the philanthropist and former Citigroup chief Sandy Weill, has given $106 million to fund a new brain disease research network at U.C. Berkeley, U.C. San Francisco and the University of Washington.

The new Weill Neurohub is intended to “forge and nurture new collaborations between neuroscientists and researchers” in an effort “to speed the development of new therapies for diseases and disorders that affect the brain and nervous system,” the foundation says.

• It will provide funding for faculty, postdoctoral fellows and graduate students at the universities.

• The bulk of the funding will support cross-institutional projects to better understand the brain and treatment of disease.

• But some will also go to “high-risk/high-reward” research projects — ambitious proposals that are unlikely to find support through conventional funding sources.

Neurological and psychiatric disorders and diseases cost $1.5 trillion a year in the U.S., according to a 2016 study by the Information Technology & Innovation Foundation.

The C.E.O. of the health care company Abbott Laboratories, Miles White, will step down from the position in March 2020. He will be succeeded by Abbott’s president and operating chief, Robert Ford.

The mining group BHP named Mike Henry, who leads its Australian operations, as its new C.E.O.

Harry Shum, who lead’s Microsoft’s artificial intelligence and research group, is leaving the company. Kevin Scott, the company’s C.T.O., is taking on Mr. Shum’s responsibilities in addition to his own.

The C.T.O. of the Facebook-owned virtual reality company Oculus, John Carmack, is leaving the company, to work independently on artificial intelligence.


• The activist investor Carl Icahn revealed that he holds a 4.2 percent stake in HP, and he supports its acquisition by Xerox. (WSJ)

• American Outdoor Brands, the maker of Smith & Wesson firearms, said that it planned to split into two companies — one selling guns, the other selling outdoor products. (WSJ)

• Blackstone, Tiger Global, Lightspeed and Founders Fund are all raising huge funds to invest in late-stage companies, despite SoftBank’s recent struggles with such investments. (FT)

• Alibaba introduced the share sale for its Hong Kong listing yesterday, hoping to raise up to $13.4 billion. (Reuters)

Politics and policy

• A federal appeals court ruled that Congress can have access to President Trump’s tax records, paving the way for a Supreme Court battle. (NYT)

• Deval Patrick, the former governor of Massachusetts, called several leading Democrats and allies to say that he would announce a bid for the White House today. (NYT)


• Is data the new antitrust battleground? (Axios)

• The Wikipedia co-founder Jimmy Wales has started his own social network in an attempt to combat some of the problems that bedevil Twitter and Facebook. (FT)

• Motorola has bought back its Razr handset, only this time it has a folding screen — and will cost $1,500! (CNBC)

• Apple unveiled a new, larger version of its MacBook Pro — without its controversial keyboard. (WSJ)

Best of the rest

• The newspaper chain McClatchy, which has more than 30 publications in 14 states, said that it planned to eliminate Saturday print issues at all its daily newspapers by the end of 2020. (NYT)

• McDonald’s has pitched self-ordering kiosks as part of a plan to increase sales. That’s a problem for the significant slice of the chain’s customers who want to pay in cash. (Bloomberg)

• Germany’s economy grew 0.1 percent in the third quarter, narrowly avoiding a recession. (NYT)

• China’s purchases of steel billets have surged more than tenfold since April, as it becomes an unusual destination for unwanted shipments from overseas. (Bloomberg)

• Retail construction in Dubai over the next two years is expected to fill more than three Mall of Americas. (Bloomberg)

• How the 40 largest airports in the country stack up. (WSJ)

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