The world’s factory is slowing down and it has nothing to do with Trump 2.0. 

On Tuesday, data released from China’s General Administration of Customs Bureau showed that the country’s export business grew just 6.7% in November compared with a year earlier. That’s down from October’s 12.7% growth, and lower than the expectations of experts who predicted a rush of exports ahead of the incoming US presidential administration’s much-ballyhooed tariffs. The export slump suggests Beijing may be grappling with larger issues than any tit-for-tat trade spat.

Deflation Nation

China’s export industry has not been top of mind for Beijing leaders this year. They’ve been preoccupied instead by a major slump in the property market and sagging domestic consumption that have had the country on the edge of a deflationary spiral. On Monday, China’s National Bureau of Statistics announced that consumer inflation in November fell to just 0.2%, marking a five-month low. That triggered Beijing to loosen its monetary policy stance — from “prudent” to “moderately loose” — for the first time since the end of the global financial crisis 14 years ago. In other words: If China isn’t in crisis mode yet, it’s certainly in crisis prevention mode. Tuesday’s stats provided more evidence of anemic domestic consumption; imports decreased 3.9% in November, more than the 2.3% dip in October.

But it’s the slowdown in exports that might be more concerning. With China now facing pressure on both sides of the import-export equation, some experts are starting to ask the big question: What if the export-dependent economy can’t grow its exports anymore?

• China accounts for roughly 30% of global manufacturing, far outweighing its 15% share of global consumption. As Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, told the Financial Times this week, that means the rise of protectionism in Western nations could be especially harmful to China.
• Beijing has set out to increase trade with the Global South as a hedge against Western protectionism. But according to a Wall Street Journal analysis of government data, Tuesday’s figures showed that the growth of exports to the Association of Southeast Asian Nations, China’s largest trading partner, slowed to just 14.9% year-over-year in November, down from 15.8% in October (trade to the US actually remained relatively flat, growing around 8% in October and November each).

China will still flirt with a record full-year trade surplus of $1 trillion, but 2024 could mark a turning point. “I think we’ve hit the peak of the traditional manufacture-and-export model,” Yao Yang, the director of Peking University’s China Center for Economic Research, told the FT.

Trump Trade: Then there are the tariffs. How big? On the campaign trail, President-elect Donald Trump promised tariffs as high as 60% on Chinese goods, but more recently he has threatened levying tariffs of just 10%. Beijing has indicated it will do whatever it takes to reach its 5% GDP growth goal in 2025 — including raising its initial budget deficit target to an all-time high of 4% of GDP.

A major American institutional investor is planning to join a lawsuit that says Switzerland’s time to pay up is long fondue — er, overdue.

AllianceBernstein will seek $225 million in the case demanding the Alpine country compensate investors after it wiped out $17 billion of troubled Credit Suisse’s debt amid a government-arranged takeover by rival UBS, according to a Financial Times report.

The Name’s Bond, AT1 Bond

At the eye of this legal storm is the additional tier one (AT1) bond, also known as a “contingent convertible” or “CoCo” bond. The $245 billion sector consists of risky bonds — the investor upside being a higher coupon — that can be converted to equity if a bank’s capital holdings dip below regulatory requirements, essentially acting as shock absorbers for stress. 

They can also be written off, which Credit Suisse bondholders learned the hard way. After the bank collapsed in March 2023 following too many scandals to list (seriously), the Swiss government oversaw a merger with UBS that included the highly unusual decision to pay $3.2 billion to shareholders and absolutely nothing to Credit Suisse’s $17 billion worth of AT1 bondholders. Usually, bondholders in Europe under the Basel III framework are first in line for scraps when an institution fails.

And so, arguing there was “an unlawful encroachment” on their property rights, a group of Credit Suisse AT1 Bondholders filed a lawsuit in US federal court against Switzerland in June. They sought not Emmental, Gruyère or Appenzeller, but at least some of the owed cheddar. The FT reported Tuesday that AllianceBernstein, which manages $800 billion, will join the fray:

• The lawsuit is unusual because countries typically have investment treaties, but the famously neutral Swiss don’t have a treaty with the United States or many countries where Credit Suisse AT1 bondholders are domiciled. Quinn Emanuel, the law firm leading the case, is good at taking on countries, having won a $1.5 billion bond case against Argentina in a UK court last year.
• The $225 million in damages sought from Switzerland by AllianceBernstein would bring the lawsuit’s total to $375 million, sources told the FT.

Alpine Obstruction: Last week, the Swiss government filed a motion to dismiss the case, arguing it has sovereign immunity and that the lawsuit should take place in Swiss court, where it would presumably have the backing of regulators who have defended the controversial decision to wipe out the AT1 bonds.

Amazon touts itself as the everything store, but there are still markets it hasn’t yet absorbed into its everythingness. Now there’s one less. 

This week, the e-commerce giant launched Amazon Autos, a new wing of its business that lets you buy cars from dealerships. To start off, you’ll only be able to buy Hyundais, because that’s the company that partnered with Amazon for launch, but Amazon wouldn’t be Amazon if it stopped at just one brand.

Wheels n’ Deals

US car dealerships have had a bit of a hard year: Weakening demand prompted many manufacturers and dealers to offer price cuts in the summer, and on top of that a cyberattack hit thousands of dealerships, reducing many to pen-and-paper operations and costing the industry more than $1 billion, according to Anderson Economic Group.

Enter Amazon. The company indicated last year that it was getting revved up about cars. The pandemic saw a trend towards buying cars online, but the momentum of that trend hasn’t really had much staying power, especially since exclusively online car sales companies have had engine problems:

• Used car retailer Cazoo fell into administration — a.k.a., the formal process for handling insolvency for companies in the UK — in May of this year. Cazoo started life as a dealer, but later pivoted to being more of a platform connecting buyers and sellers. Meanwhile, pandemic darling Carvana managed to swerve away from financial oblivion earlier this year.
• Amazon, true to form, is adopting the marketplace model, allowing Hyundai to sell cars through its platform rather than buying and selling cars itself. A selling point for the new service is that Amazon will let prospective buyers do all the financing paperwork online.

Dude, Where’s My Dealership: One car manufacturer that has had success with an online model is Tesla. The EV giant has always favored a direct-sales approach and even fought for the right to do so, legally challenging state bans on direct-to-consumer car sales. Amazon could offer a little of that DTC magic to legacy car brands more used to pure dealership sales — just so long as the cars aren’t delivered in boxes full of puffy plastic bags.