DealBook Briefing: Chinese Investment in the U.S. Drops 90%

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The steady flow of money that China once poured into the U.S. has shrunk 90 percent since President Trump took office, showing how frosty relations have become between the two countries.

Some of the reasons, according to Alan Rappeport of the NYT:

• Tougher regulatory scrutiny by the U.S. government, including on national security grounds.

• Mr. Trump’s tariffs, which have scared off many businesses.

• Beijing’s limits on foreign investment, along with China’s slowing economy.

• China may also be turning off the investment spigot as retaliation for the tariffs.

Sometimes the chill has helped U.S. companies. Last month, UnitedHealth bought the health care start-up PatientsLikeMe after American national security regulators worried about the company’s then-owner, a Chinese business.

But it’s also hurting industries and states. The real estate sector has tumbled as Chinese buyers evaporated. And states like Michigan that have wooed Chinese investment to create new factories and jobs are feeling pinched.

Many in Washington “view the decoupling of the two economies as inevitable,” Ana Swanson of the NYT writes. Among them: the former Trump adviser Steve Bannon, who helped revive the Committee on the Present Danger to warn about risks posed by China.

Others worry that a new red scare could go too far. “We’ve made this mistake once before, during the Cold War,” Susan Shirk, the chair of the 21st Century China Center at the University of California at San Diego, told Ms. Swanson. “I don’t think we should make it again.”

More: The White House is reportedly meeting with technology executives today to discuss its recent reprieve for Huawei.

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CreditMike Stewart/Associated Press

The credit bureau Equifax is expected to pay around $650 million to settle federal and state investigations and consumer claims relating to a data breach that exposed sensitive information belonging to 145 million people, Stacy Cowley and Peter Eavis of the NYT report.

• Most of the roughly $650 million would go toward compensating consumers for costs associated with the breach.

• The breach, which was revealed in September 2017, included Social Security numbers and driver’s license information. It was one of the worst exposures of Americans’ personal data.

• It’s still unclear who orchestrated the hacks.

The figure is in line with what Equifax expected. “In a recent financial filing, Equifax said it had set aside $690 million to cover the anticipated legal costs of the hacking,” Ms. Cowley and Mr. Eavis write. “It has also spent hundreds of millions of dollars on improving its technology systems and on free credit report monitoring services for those affected by the breach.”

“Equifax is facing a lighter financial penalty than some other corporate transgressors, like Wells Fargo, which paid $1 billion last year to settle charges from federal regulators for forcing unnecessary products and fees on unwilling customer,” Ms. Cowley and Mr. Eavis write. The F.T.C., the main federal regulator for data security, has a limited ability to impose fines.

More details are set to be announced today by federal and state agencies.

CreditZsolt Czegledi/EPA, via Shutterstock

Cast your mind back almost a decade, and you might remember Google’s becoming embroiled in a scandal in which its Street View mapping vehicles sucked up email addresses, passwords and more by connecting to unencrypted household Wi-Fi networks around the world. Now it is settling a lawsuit over the matter for very little, Bloomberg reports.

• Google is expected to pay just $13 million to settle the 2010 privacy lawsuit.

• “Owners of the Wi-Fi networks whose information was captured by Google won’t get individual payouts, except for about 20 plaintiffs who filed the complaint as a class action,” Bloomberg reports.

• What’s left will “be distributed to a handful of consumer privacy advocacy groups.”

• Google will also “destroy all the data it still possesses and commit to teaching people how to protect their privacy on the internet.”

This is a small price to pay. It’s less than one-sixth the net income that Google generates on average in a single day, according to Bloomberg. But it’s in the ballpark for settlements that internet companies have paid over the last decade, before animosity toward Big Tech reached its current level.

More: Google also agreed to pay $11 million to settle a lawsuit accusing it of discriminating against older job applicants.

U.S. companies’ overall tax rate has fallen since President Trump’s tax overhaul in late 2017. But the benefits of the new law didn’t fall evenly, Theo Francis and Richard Rubin of the WSJ report.

• The 2017 law lowered the corporate tax rate to 21 percent from 35 percent to help American companies compete in foreign markets.

• The median effective tax rate for S&P 500 companies fell to 19.8 percent in the first quarter of the year, down from 25.5 percent two years earlier, according to the WSJ.

• Just 28 companies reported a global tax rate above 32 percent in the quarter, down from 143 before the new law.

• But about a quarter of the S&P 500 reported little change in tax rates, and 17 percent disclosed rate increases of five percentage points or more.

CreditAgence France-Presse — Getty Images

A new stock board for homegrown Chinese tech companies opened this morning, and some traders appear to have become a little overexcited, pushing some shares up by as much as 520 percent, CNBC reports.

• The new STAR Market, operated by the Shanghai Stock Market and aimed at domestic investors, kicked off with 25 companies staging their I.P.O.s.

• The board is meant to be an experiment, with more relaxed conditions for tech companies looking to go public.

• All 25 companies more than doubled their I.P.O. price. One, the semiconductor component maker Anji Microelectronics, had its buying halted briefly as its stock soared, but its shares still posted gains of as much as 520 percent.

“The price gains are crazier than we expected,” Stephen Huang, vice president of Shanghai See Truth Investment Management, told Reuters. “These are good companies, but valuations are too high. Buying them now makes no sense.”

CreditTina Fineberg for The New York TImes

Mr. Morgenthau, Manhattan’s longest-serving district attorney, known for focusing on white-collar crime, died yesterday, Robert McFadden of the NYT reports. He was 99.

• “Mr. Morgenthau was the face of justice in Manhattan, a liberal Democrat elected nine times in succession, usually by landslides and with the endorsement of virtually all the political parties,” Mr. McFadden writes.

• “While he rarely went to court himself, Mr. Morgenthau, by his own count, supervised a total of 3.5 million cases over the years.”

• “Mr. Morgenthau was probably the most innovative prosecutor in the city’s history. To pursue financial crimes, he hired scores of accountants and detectives with financial expertise.”

• His victories included prosecuting Dennis Kozlowski — the C.E.O. of Tyco International who was known for buying $6,000 shower curtains — of looting $100 million from the company.

• Mr. Morgenthau also spent years working with federal prosecutors investigating the Bank of Credit and Commerce International, which was accused of handling money for drug cartels and terrorists. The case uncovered a $15 billion fraud, and the bank was forced to close.

CreditChristopher Lee for The New York Times

What happened when Andy Newman of the NYT spent 27 hours delivering food for apps like DoorDash, Uber Eats and Postmates? This:

• “I tasted the thrill of a decent tip and the agony of accepting a blind order that took me 40 blocks uptown to deliver two bagels.”

• “In fancy new apartment buildings and airy open-plan offices, young professional-looking people opened their doors just long enough to grab the food and mouth thanks.”

• “Tips have a way of vanishing: One app subtracts the amount the customer tips from the amount it pays the courier — effectively pocketing the tip.”

• “The riders I talked to average hourly wages in the midteens with tips, though I met a couple of Jedi Masters who cleared over $20. My rookie earnings added up to just under $10 an hour — $5 below the city’s minimum wage.”

“I learned up close how the high-tech era of on-demand everything is transforming some of the lowest-tech, lowest-status, low-wage occupations — creating both new opportunities and new forms of exploitation.”

Gov. Ricardo Roselló of Puerto Rico said he wouldn’t seek re-election after revelations of corruption in his administration. But he won’t resign, either.

Credit Suisse has hired Jerry Wiant from Lazard as the head of investment banking for U.S. banks.

Amazon has hired Jeff Miller, one of President Trump’s top fund-raisers, to lobby on behalf of its cloud services unit.

Walmart plans to combine the finance and logistics teams for its e-commerce and physical stores units. Greg Smith, the head of logistics for U.S. stores, will lead the combined logistics team, while Michael Dastugue, the head of finance for the same division, will oversee the new team.

Deals

• Executives from Renault and Nissan suggested that their focus was on repairing their business alliance, not reviving Renault’s deal talks with Fiat Chrysler. (NYT)

• J.C. Penney has hired debt restructuring advisers to help shore up its finances and potentially avoid having to file for bankruptcy protection. (Reuters)

• The founder of the Indian hotel start-up Oyo, Ritesh Agarwal, will increase his stake in the company to 30 percent from 10 percent by buying other investors’ holdings for $2 billion. (LiveMint)

• PepsiCo agreed to buy Pioneer Food of South Africa for $1.7 billion. (Reuters)

• How individual investors are trying to become private equity deal-makers. (NYT)

Jeffrey Epstein

• The financier sought to rehabilitate his reputation through favorable articles written by freelancers for Forbes.com, National Review and HuffPo. (NYT)

• Here’s an attempt to map out Mr. Epstein’s complicated social network. (Bloomberg)

• Residents of the Caribbean island near Mr. Epstein’s private resort said he appeared to be taking underage girls there as recently as this year. (Vanity Fair)

Politics and policy

• Eugene Scalia, President Trump’s pick for labor secretary, has made a career of defending companies like UPS and SeaWorld in cases brought by workers. (NYT)

• A compromise on the federal budget would raise the debt ceiling for two years, but would reportedly have few, if any, spending cuts. Some Republican lawmakers will probably oppose such a deal. (WaPo, WSJ)

• Senator Elizabeth Warren has proposed a crackdown on the private equity industry. But Wall Street financiers still prefer her to Senator Bernie Sanders. (Bloomberg, Politico)

• Some Democrats worry that popular proposals like a wealth tax could become a liability in the 2020 presidential election. (NYT)

Brexit

• Britain’s chancellor, Philip Hammond, said he would quit if Boris Johnson became the next prime minister. Here’s who could replace him as the country’s finance chief. (NYT, Bloomberg)

• The pound has become a barometer for Brexit. It’s not looking good. (NYT)

Tech

• The F.T.C. reportedly voted to approve a multimillion-dollar settlement with Google over YouTube’s violation of children’s privacy laws. (FT)

• But is the F.T.C. really up to regulating Big Tech? (Politico)

• Here’s a lengthy profile of Nick Clegg, who’s supposed to be the savior of Facebook’s communications and policy strategy. (New Statesman)

• Russia’s Federal Security Service reportedly suffered its biggest-ever hack. (Business Insider)

Best of the rest

• A contact lens start-up called Hubble offers customers cheap prescriptions, but it may be taking advantage of federal regulations, to the detriment of consumers. (NYT)

• CBS went dark for more than 6.5 million AT&T customers after the two media giants couldn’t agree on a new contract. (NYT)

• France wants the I.M.F to raise the age cap for its leader, to widen the field of potential candidates. (FT)

• The raids on Deutsche Bank’s Frankfurt offices were reportedly what finally drove the bank’s C.E.O., Christian Sewing, to make drastic changes. (FT)

• How bosses spy on employees these days. (WSJ)

• Safe deposit boxes aren’t safe. (NYT)

Thanks for reading! We’ll see you tomorrow.

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