China eases COVID-19 policies, but factories are struggling to ramp up production

Recalibrating China’s zero-COVID mandate: In the wake of waves of resistance and social unrest, Beijing lifted some restrictions late last week while it redoubled its police presence to subdue protests, per Nikkei Asia.

  • Local authorities say they will scale back mass testing and allow some infected citizens to isolate at home instead of hauling them to makeshift hospitals.
  • Major cities have dropped testing requirements to enter public places, authorities are playing down the severity of infections, and even state-controlled media outlets have shifted away from scaring viewers to running hopeful stories of COVID-19 survivors.

How we got here: China’s strict COVID-19 policy has led to the most significant challenges for the Communist Party since the Tiananmen crisis 30 years ago.

  • Two weeks ago, workers at Foxconn’s largest iPhone factory clashed violently with police over pay delays, poor working conditions, and “closed-loop” factory lockdowns.
  • Chinese residents in every major city across China protested against monthslong lockdowns and mass-testing campaigns and called for President Xi Jinping to step down.
  • Apple, which is accelerating to move production out of China, has said it’s working closely with Foxconn to restore operations. Mounting protests, however, are well beyond Foxconn’s control.

What’s next? The Chinese government now has the unenviable task of managing expectations of the virus threat and walking back its zero-COVID stance. All that while maintaining focus on safeguarding public health.

Manufacturing hubs continue to struggle: China’s restrictions and “closed-loop” mandate that kept workers confined to factories have exacted a heavy toll on manufacturing hubs and campuses, but other problems are starting to surface.

  • Pandemic factory shutdowns in China have resulted in record-low manufacturing output, and now we’re seeing its compounded effects on factories and their workers.
  • “The closed-loop model is clearly unsustainable, as Foxconn’s case has shown that workers are no longer ready to accept such inhuman conditions,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis.
  • Foxconn said it doesn’t expect production to resume until late December or early January.
  • The virus isn’t the only problem. Guangzhou’s manufacturing hub is experiencing an unprecedented migrant worker shortage. In the Haizhu manufacturing village, over 80% of migrant workers have left, leaving manufacturers in the lurch.

The problem: Beijing’s uneven and unclear strategy on how it plans to shift away from zero-COVID could prolong nationwide economic recovery. With companies already planning partial exits from China, this could have long-term economic repercussions.

This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.


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