It’s now three years since the first COVID-19 case was reported in Wuhan, but China doesn’t appear to be giving up on its tough coronavirus policy. In fact, quarantine facilities and makeshift hospitals are being expanded everywhere mainland to handle the largest wave of cases on record. Panic buying is also taking place among supermarket delivery apps as Beijing enters lockdown-like restrictions, while Nomura estimates more than a fifth of the country is under some form of restricted movement.
Dissatisfaction grows: Apple (NASDAQ:AAPL) The iPhone factory of supplier Foxconn (OTCPK:FXCOF) in the city of Zhengzhou has drawn excessive attention as videos of workers unrest were shared on social media. Foxconn has since offered workers who want to leave a payment of 10,000 yuan (US$1,400) and free transportation to return home. It’s unclear how many of the 200,000 employees were involved in “iPhone City,” but Apple (AAPL) has flagged “lower iPhone 14 Pro and iPhone 14 Pro Max shipments” due to previous curbs at the complex, which dormitories and is responsible for 70% of global iPhone production.
“The real hurdle for the economy lies in the more zealous implementation of COVID restrictions by local officials rather than insufficient credit resources,” wrote Ting Lu, chief China economist at Nomura. Concerns are growing as infections surge in the manufacturing province of Guangdong and the megacity of Chongqing, as well as the financial hub of Shanghai and the logistics hub of Zhengzhou. At the end of the third quarter, China’s GDP was up just 3% y/y, well below the official target of around 5.5% announced in March.
thought bubble: China’s key leaders have viewed the zero-COVID policy as a source of national pride that could demonstrate the superiority of their system compared to death tolls and infections in many western countries. There are also fears that larger outbreaks could overwhelm the Chinese healthcare system (particularly given the population’s low natural immunity), which could mobilize public anger and erode trust in the government. Earlier this month, officials said they would be more specific and targeted when implementing pandemic controls, but there would be no fundamental change to the overall zero-COVID stance.
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