Workers queue up to get tested for Covid-19 at the Foxconn factory in Wuhan, Hubei province, on August 5, 2021. Labour shortages and demonstrations at the Foxconn factory in Zhengzhou have renewed concerns over China’s increasingly precarious place in the global supply chain. Photo: AP
Opinion
April Zhang
April Zhang
China’s Covid troubles show why it’s not ready to compete with the US
Talk of great power rivalry with the US makes China look strong and powerful, but recent unrest at Foxconn’s Zhengzhou factory shows a different narrative
China is not yet on an equal footing with the US: while it struggles to develop its hi-tech prowess amid US restrictions, it must work hard to protect its vulnerable position in the global supply chain
As a Chinese person, I sometimes consider the claim China is the biggest threat to the United States flattering. In 2021, even though China’s annual GDP was not too far behind that of the United States, China’s GDP per capita of US$12,556 was far behind the US mark of US$69,287. Also, while the US sent people to the moon in 1969, China only recently completed building Tiangong, its first space station.
Therefore, this great power rivalry that puts China on an equal footing with the US is a compliment. It makes China look strong and powerful.
However, the recent unrest at Foxconn’s Zhengzhou factory has revealed a more realistic narrative. China is not on an equal footing with the US. In fact, to protect its own vulnerable position in the global supply chain, China must support US industries.
Foxconn’s Zhengzhou factory in Henan province is the largest iPhone factory in the world. At the end of October, tensions over strict Covid-19 restrictions began to boil over. Many workers either fled or were put into isolation. The result was a labour shortage and disrupted iPhone production ahead of the Christmas and Lunar New Year holidays.
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Foxconn dangles incentives for workers as iPhone shortages plague holiday season
Foxconn dangles incentives for workers as iPhone shortages plague holiday season
Amid this crisis, help came from an unexpected source – the Chinese government. Village officials were mobilised and reportedly had to help hire at least one worker from each of their villages. City government officials were urged to join the factory for at least a month. Military veterans were asked to take part in the resumption of production. All efforts were aimed at boosting iPhone production.
The issue is that Foxconn does not manufacture iPhones but only assembles them. According to a teardown of the iPhone 13 Pro Max, the most valuable parts came from American, Japanese and South Korean companies. Foxconn’s job is to put the parts together and ship the final product to the world. As an assembly facility, it offers mostly low-paying jobs.
This makes China vulnerable. Assembly workers do not require high skill sets and can be easily replaced by workers in other regions. In fact, Foxconn has been keen to expand and shift iPhone production to India for years. In 2019, Foxconn opened its factory in India and, in late 2022, began producing the latest model iPhone 14.
Foxconn is not alone. Other foreign companies are taking similar actions, threatening China’s place in the global supply chain.
One way for China to become less vulnerable is to transform itself from an assembly floor to a real technology powerhouse to compete with Japan or South Korea. That means China must develop its ability to produce the best microprocessors.
Unfortunately, it faces strong headwinds. The latest challenge is an export ban from the US of the best chips, tools and components to China, as well as restrictions on Americans supporting chip-making at Chinese facilities.
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AI chip maker ordered by US government to halt exports to China
AI chip maker ordered by US government to halt exports to China
While China struggles to develop its tech muscle, it must protect its position in the global supply chain. To do so, China was obliged to help when Foxconn, one of the biggest employers in the province, got in trouble.
The “zero-Covid” policy followed the same logic that China must not let the pandemic disrupt factories’ operations at any cost, and it worked until recently. The Covid-19 pandemic brought the world to a halt in 2020 and 2021, but not China. After an initial setback, Chinese economy rebounded quickly and exports surged. Most people stayed safe, although there were frequent tests and occasional lockdowns.
However, China’s economy is now under growing pressure. A slight relaxation of Covid-19 restrictions was followed by a rise in Covid-19 cases. To make things worse, the Fifa World Cup showed Chinese people a fun and mask-free world outside China.
Such circumstances are ripe for social discontent. The first protests happened in Urumqi, and protests across the country followed soon after. Demonstrators in major cities called for an end to pandemic controls.
If protests hurt the global supply chain, China’s position will be further weakened and serious setbacks will come on all fronts. If the situation turns around quickly, China can keep its position for a little longer. This is not a headache that would trouble a country capable of rivalling the US.
April Zhang is the founder of MSL Master and the author of the Mandarin Express textbook series and the Chinese Reading and Writing textbook series
