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Xi’s zero-COVID policy is sinking China's economic ship into recession

China’s stance towards COVID-19 and its zero-COVID policy could be the final nail in the coffin that damages the present regime’s premier status in the country for years to come. Over the course of the last two years, China has faced nearly regular, incessant protests from its citizens, which more often than not tend to turn violent. The country’s oppressively rigid response to the crisis, including daily mass testing and stringent lockdowns have left the population living in a constant state of fear, panic and repressed anger which tends to erupt in the form of resistance against the state and government; not to mention the resulting devastating economic repercussions the country is facing.

12.12.2022 22:22
Piše: Valerio Fabbri
Ključne besede:   China   economy   Covid   Foxconn   protests   citizens   iphone   Xi   Beijing   recession

Some Chinese citizens who are not affraid to talk think that China is stepping into recession: the economy is heading down, Less people in shopping malls, the disappearance of small businesses and higher prices for daily goods ... not because of Covid but because of stupid policy.

Foxconn, Apple’s largest supplier, has faced unending chaos in the last two months at its Zhengzhou plant, which happens to be the largest iPhone factory in the world, located in the Henan province in central China. Formerly employing over 200.000 workers, the facility has been riddled with violent protests by employees since the last two weeks of November, which the management and authorities failed to curb in an effective manner. Following a major COVID-19 outbreak in October, which led to a majority of workers leaving the factory compound out of fear of barbaric methods adopted to deal with these situations, the manufacturer held an employment drive that ultimately received over 100.000 applicants. 

 

Matters took a turn for the worse when incoming employees were informed of a different scenario than the rosy promises made to them at the time of recruitment. Newly-hired employees were promised a bonus payment of 3000 yuan after 30 days on the job, and another 3000 yuan to be doled out at the completion of 60 days. The hollow promises were soon proven to be a mere tactic of enticement, as workers upon arrival at the factory were intimated that the bonus would only be given out much later. New workers, disgruntled at being deceived, lost no time to stage protests against the management. Now, things stand at such a delicate turn where the manufacturer, Foxconn, has gone as far as to pay the workers two month of wages ($1400) to quit and leave the facility. This drastic step came in light of the wildly violent turn the protests had taken, when the workers were met with brute force and suppression on the hands of the authorities.

 

 

"Public unrest in China at the current moment is unparalleled by other protests that have happened in the country in decades."

 

 

However, the linchpin that set the chaos in motion at Foxconn seems to have been China’s faulty zero-COVID policy. Like dominoes falling over in succession, it is the state’s inability to handle the virus and subsequent crisis which has ultimately led to this situation. Beyond the torture the policy has caused to the common people, China, popularly referred to as the "world’s factory", has had to face unprecedented economic repercussions, which has created ripple effects all over the world ultimately impacting the global economy. Foxconn is far from being the only business to be suffering at the hands of China’s senseless, restrictive policy. Leading automotive brands such as Honda and Yamaha have had to keep operations suspended in their factories in the Chongqing district; Volkswagen suspended production at its plant in Chengdu, following fresh waves of COVID cases being reported. Having to adhere to the stringent measures of virus containment, all these businesses have had to face severe supply-chain disruptions, and massive losses as a result of the lull in manufacturing and production.

 

Apple Inc. was hit by the Foxconn protests at the worst possible time—in the midst of the holiday season of Thanksgiving, Black Friday and Christmas upcoming, consumer demands remain through the roof this time of the year. The company suffered the loss of nearly $1 billion per week in iPhone sales during the protests in China, with the brand losing out on nearly 6 million units of its iPhone 14 Pro, the company’s most in-demand product of this year. Apple has finally reached a point where the tech giant is seriously deliberating pulling production out of China. The businesses whose factories have remained functioning have adopted the "factory bubble" system, whereby the workers are provided with on-site accommodation so they can easily manage the back-and-forth to and from the factories without coming in contact with outsiders. However, the system turned into one of oppression and forced productivity; Tesla’s factory in Shanghai being the case in point, where workers were expected to sleep on the floor during the months when the city was under lockdown earlier in the year.

 

 

"In one survey 78% of responding brands said China was an unattractive choice for investment, owing to its COVID response!"

 

 

China’s COVID-response has proved to result in a lose-lose situation. Nor is the zero-COVID policy able to contain spread of the virus, nor is it capable of preventing virus outbreaks in the first place. And the restrictions that are expected to be followed are only acting as a deterrent, instead doing a very efficient job at swiftly driving out the production lines of businesses from the country. The position China carved out for itself as the world’s manufacturer over the span of 40 odd years, might be on its way to being washed away by two years of poor strategizing for the pandemic by Xi’s government. A survey conducted by the EU Chamber of Commerce on businesses in China reported that 78% of responding brands said the country was an unattractive choice for investment, owing to its COVID response. Public unrest in China at the current moment is unparalleled by other protests that have happened in the country in decades. A Beijing-based citizen was quoted by a news source as "I can feel the recession around me. Obviously, the economy is heading down. Less people in shopping malls, the disappearance of small businesses and higher prices for daily goods are better proof than official data. It is just a catastrophe now, not because of Covid but because of stupid policy."

 

And this sentiment is shared by bigger entities than individual citizens. 94 % of companies with their production base in China are considering moving out of the country, and to undertake a "China plus one" strategy, to cover their bases and balance out disrupted production when trouble gets stirred up in China. A number of major institutions already have work underway to establish a backup plan elsewhere, including the automobile companies of Honda, Hyundai, Ford, Mercedes-Benz. Apple, the tech-giant that took the biggest hit to its revenue due to its overdependence on Chinese manufacturing, has already moved part of its production to India. Following the protests in China’s Foxconn facility last month, the supplier planned to quadruple the workforce in its Indian plant to 70,000 workers. The tech company is already expanding the range of products it plans to manufacture in the country, and India is expected to have worth of exported mobile phones rise up to $9 billion in 2023 following these production investments.

 

While China’s bane is proving to be a boon for countries like India, the matter at its heart still remains the necessity for China to up its game against the threat of the virus, and to adopt better policies than barbaric containment which ultimately proves to be fruitless. The futility of the state’s strategy is apparent with the world largely having found ways to battle the virus while China continues to live in the exact same state, if not worse, than the one it had entered the pandemic in. The effect of China’s poor decision-making is aptly encapsulated in the statement of a Shenzhen resident, "Seeing the whole world open up and having fun while you can’t even leave your city is demoralising and infuriating."

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