China COVID Restrictions And Worker Protests Take A Bite Out Of Apple

Foreign investors in China are at the breaking point.

For almost three years, China has conducted the most extreme anti-COVID policy in the world. This policy is called Zero Covid and that name should be taken literally.

In the spring of 2022, the Communist Party of China locked down Shanghai, a city of 26 million people. Just weeks later, they locked down Beijing, a city of 22 million people.

These lockdowns included extreme forms of transportation bans on incoming and outgoing trains, planes and automobile travel. Individuals and entire neighborhoods were locked in their homes. Testing sites were set up in tents every few blocks apart. Those allowed out were required to have negative PCR tests not more than 48 hours old, which meant being tested three or four times per week.

The costs to the Chinese economy were enormous. The psychological costs imposed on the population were also high to the point that demonstrations and riots broke out across China in the last week of November.

In response, China eased up on its policies. That easing may not last as hundreds of thousands and eventually millions of Chinese become infected. My estimate is that one million or more Chinese may die of COVID in the coming year.

All of this is becoming too much for foreign investors and manufacturers with expansive operations in China. This article describes how Apple is now considering moving major operations related to iPhone production out of China to friendlier locations such as India and Vietnam.

Apple is not alone. Many other companies are making the same calculation for the same reasons.

This is all part of a larger long-term decline in the Chinese economy for reasons other than COVID including the real estate collapse, pollution, demographics and lagging technology gains.

Apple considers its Chinese operations to be poison fruit at this point. Apple has other options in Asia. China does not have other options than foreign investment.

You can forget about hyperbolic stories of how the twenty-first century will be the Century of China. It’s more likely China will be carried off the field on a stretcher in the next twenty years.

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