The factory as a trap

Dhe images circulating on China’s internet are reminiscent of the days after Russia invaded Ukraine. But the tens of thousands who are believed to be pulling suitcases on the expressways and lugging bags across fields in the central Chinese city of Zhengzhou are not fleeing war. They are workers at Apple’s iPhone’s largest manufacturing facility, which produces mostly human drama following a Covid outbreak two weeks ago – and observers say could be a signal that the global economy will remain below Beijing’s zero-Covid for many months, possibly years -Politics will suffer.

When the Air Force Airbus with Chancellor Olaf Scholz (SPD) lands in Beijing on Friday morning, the 12 CEOs who are traveling with them, such as Oliver Blume (Volkswagen), Martin Brudermüller (BASF) and Roland Busch (Siemens), bring another hope with them: that their planned investments into the country may not be affected much longer by Beijing’s radical zero-Covid policy. In the current year, with repeated lockdowns of entire cities such as Shanghai and Shenzhen, which often lasted weeks and sometimes even months, this has not helped the economy to pick up.

Downtime for weeks

The attempt not to rely on vaccinations, but to interrupt the chain of infection at an early stage, has meant that not only ports but also factories like VW’s in China have been shut down for weeks. As a result, there have been enormous delays in the global supply chains. Now the iPhone 14 could arrive later with the customers – and in the future also many other products that are made in China.

Since July, Beijing has “essentially stopped vaccinating the particularly vulnerable elderly population,” says Ernan Cui of the Beijing analysis house Gavekal Dragnomics. The leadership has recognized that the domestic vaccines against the omicron variant are ineffective. Beijing has not approved foreign vaccines. From an interview with the German ambassador in Beijing, it can be concluded that Scholz could hope to convince his interlocutor Xi Jinping of the vaccine from the Mainz-based manufacturer Biontech, of which a representative is on the government plane.

It would come as a surprise that China’s president suddenly allowed foreign aid during the pandemic, after he just presented the zero-Covid policy as one of his greatest successes at the party congress. Rather, the case of the lockdown of Apple supplier Foxconn in Zhengzhou has sparked speculation that the leadership in Beijing could use its Covid policy even more to try to force foreign manufacturers like Apple out of the Chinese market.

Caught in the “closed circuit”

For example, during the spring lockdown in Shanghai, the government had photos and videos of locked-in residents who had received no food for weeks and screamed from their windows with hunger all censored on the Chinese internet. The situation at Foxconn’s factory in Henan province has become even more dramatic since the company said its 300,000 workers were put into a “closed loop” two weeks ago, which keeps them trapped in dormitories and factories.

Nevertheless, countless videos are available, especially on Douyin, the Chinese version of Tiktok. In these, those affected report that there are 20,000 Covid cases in the factory. Foxconn itself does not give any numbers and only confirms that there has been an outbreak.

Videos show endless lines of buses inside the factory, allegedly taking crowds of workers to quarantine camps. Individuals report that they have not received any food or medicine for days. Because the government has switched the so-called “health codes” on the workers’ smartphones to the yellow warning level, they are fleeing in droves to their hometowns, often hundreds, sometimes thousands of kilometers away, because they are subsequently not allowed to use public or private transport.

Meanwhile, unconfirmed images show military troop carriers driving onto Foxconn’s premises, which are said to be keeping workers inside the factory. Foxconn announced on Sunday evening that it would provide buses for workers who wanted to leave the factory. For those who stayed, the company promised acceptable hygienic conditions.

Apple moves production to India

The government has left uncensored the widespread theory in China that Apple was behind the Covid outbreak in its supplier factory. The American company is relocating an estimated 5 percent of its iPhone production from China to India this year – to reduce the risk of lockdowns. Hundreds of thousands of accusations are now being spread on the Chinese Internet that Apple wants to use lockdowns like the one in Zhengzhou as an excuse to relocate even more production.

The fact that China’s central government has announced that it will send an “inspection team” to the factory could mean trouble for Apple, analysts at Chinese banks have now said. It is certain that it will be “at least six months” before China relaxes its Covid restrictions, says observer Ernan Cui.

Entry restrictions in particular could be eased. This would also benefit German SMEs, which have noticeably lost interest in investing in China since company owners, such as those in mechanical engineering, can no longer visit their local factories. However, the number of entries will only increase “marginally” and will not return to pre-pandemic levels, according to Cui.