China expands COVID restrictions, iPhone factory disruptions add to economic concerns

China expands COVID restrictions, iPhone factory disruptions add to economic concerns

  • COVID restrictions have escalated as cases have risen
  • Disruptions at the iPhone factory underscore industrial and social risks
  • Analysts warn of the possibility of an expansion of the lockdown
  • The resort city of Sanya imposes restrictions on the movement of newcomers

BEIJING (Reuters) – Chinese cities imposed more restrictions on Wednesday to curb surging coronavirus cases, adding to investor concerns about the economy, as fresh disruptions at the world’s largest iPhone factory highlighted the social and industrial toll of China’s crackdown on coronavirus. 19 gauge.

In Beijing, shopping malls and parks have closed and once bustling areas of the capital have become like ghost towns as authorities urge people to stay home.

The city of Sanya on Hainan island banned people from going to restaurants and shopping malls within three days of their arrival, and many cities across China imposed localized lockdowns as infections approached the high levels seen in April.

The measures are clouding the outlook for the world’s second-largest economy and dampening hopes that China will significantly soften its outward stance on the coronavirus anytime soon, as China faces its first winter battling a highly contagious variant of Omicron.

“While there is a small chance that the authorities will choose to back down from the coronavirus policy over the winter, there is a significant risk that containment efforts will fail,” analysts at Capital Economics wrote.

They said such a failure could lead to further lockdowns that could cause unprecedented damage to the economy.

China’s COVID restrictions, the most stringent in the world, have led to widespread discontent and production disruption at manufacturers including Taiwan’s Foxconn. (2317.TW)the largest iPhone supplier to Apple Inc.

On Wednesday, footage uploaded to social media showed Foxconn workers clearing barricades and sparring with authorities while wearing hazmat suits, chanting “Give us our wages.” The disruptions follow weeks of unrest that saw dozens of employees leave the factory due to COVID controls. Reuters could not verify the authenticity of the videos.

Regions accounting for nearly a fifth of China’s gross domestic product are under some form of lockdown or restrictions, brokerage firm Nomura estimated earlier this week, a figure that will exceed Britain’s GDP.

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Although infection numbers are low by global standards, China has stuck to its no-COVID approach, a signature policy of President Xi Jinping that officials argue saves lives and prevents the medical system from collapsing.

China reported 28,883 new domestically transmitted cases on Tuesday.

The International Monetary Fund has urged China to reset its COVID-19 strategy and increase vaccination rates.

Gita Gopinath, an official at the International Monetary Fund, said: “Although the strategy to eradicate the emerging corona virus has become smarter over time, the combination of more infectious COVID variants and persistent gaps in vaccinations has led to the need for more frequent closures, which affects the global economy.” consumption and private investment.

Residents are increasingly fed up with nearly three years of restrictions, and Wednesday’s protest at Foxconn’s Zhengzhou factory comes after crowds recently crashed through barriers and clashed with workers in protective suits in the southern city of Guangzhou.

Rising case numbers are also testing China’s resolve to avoid one-size-fits-all measures such as mass lockdowns to curb the outbreak, and to rely on recently revised COVID rules instead.

However, unofficial lockdowns increased, including of apartment buildings and compounds in Beijing, as case numbers rose to a new high on Tuesday.

In Shanghai, a city of 25 million that was locked down for two months earlier this year, China’s largest auto association said on Wednesday it would cancel the second day of the China Automotive Overseas Development Summit being held there over coronavirus fears.

Chengdu, which recorded 428 cases on Tuesday, became the latest city to announce mass testing.

Major manufacturing centers in Chongqing and Guangzhou have seen consistently high numbers of infections, accounting for most cases in China. Cases in Guangzhou fell slightly on Tuesday, to 7,970, and authorities said infections were still concentrated in key areas in the Hezhou region.

Investors who had hoped last week that China would ease restrictions have become concerned that a wave of infections could slow economic reopening. Read More Many analysts say a significant easing of COVID restrictions is unlikely before March or April.

A sharper-than-expected slowdown in China, which is hurting domestic demand in particular, would reverberate in countries such as Japan, South Korea and Australia, which export hundreds of billions of dollars worth of products and goods to the world’s second-largest economy.

Analysts are also lowering forecasts for oil demand from the world’s largest crude importer, as recent COVID restrictions have already sent global oil futures lower.

“The next few weeks could be the worst in China since the first weeks of the epidemic for the economy and the healthcare system,” said analysts at Capital Economics.

Reporting by the Beijing and Shanghai newsrooms; By Bernard Orr; Editing by Muralikumar Anantharaman, Meral Fahmy, Tony Monroe and Bernadette Boom

Our standards: Thomson Reuters Trust Principles.

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