It has now been three years since the first COVID-19 case was reported in Wuhan, but China doesn’t seem to letting up on its strict coronavirus policies. In fact, quarantine facilities and makeshift hospitals are expanding across the mainland to deal with the largest surge of cases on record. Panic buying is also taking place among supermarket delivery apps as lockdown-like restrictions take hold in Beijing, while Nomura estimates that more than a fifth of the country is under some sort of restricted movement.
Discontent is growing: Apple (NASDAQ:AAPL) supplier Foxconn’s (OTCPK:FXCOF) iPhone factory in the city of Zhengzhou has drawn outsized attention as videos of worker riots were shared on social media. Foxconn has since offered a 10,000 yuan payment, equivalent to $1,400, to workers who want to leave, as well as free transportation to return home. It’s unclear how many of the 200,000 employees at “iPhone City” were involved, but Apple (AAPL) has flagged “lower iPhone 14 Pro and iPhone 14 Pro Max shipments” due to prior curbs at the complex, which includes dormitory accommodations and is responsible for 70% of global iPhone output.
“The real hurdle for the economy lies in local officials’ more zealous implementation of COVID restrictions rather than insufficient loanable funds,” wrote Ting Lu, chief China economist at Nomura. Concerns are growing as infections rise in the manufacturing province of Guangdong and megacity of Chongqing, as well as financial hub Shanghai and the logistics heavy Zhengzhou. At the end of the third quarter, China’s GDP was up by only 3% Y/Y, well below the official target of around 5.5% announced in March.
Thought bubble: China’s central leaders have seen the zero-COVID policy as a source of national pride, which could showcase the superiority of their system, compared with the death tallies and infections seen in many Western nations. There are also fears that any major outbreaks could overwhelm China’s healthcare system (especially given the population’s low natural immunity), mobilizing public anger and undermining confidence in the government. Earlier this month, officials said they would be more specific and targeted in implementing pandemic controls, but there would be no fundamental change to the overall zero-COVID stance.
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