Will Apple and other tech giants leave China? Here’s why they might

highlights
  • Experts say workers in China had been protesting for more rights before the outbreak of COVID-19.
  • Now Apple is taking steps to move its manufacturing center out of the country.
  • The process could take several years.
This story contains references to suicide.
Nearly . Huge cities went completely on hold for months. Factory workers locked in their jobs and unable to get out.
Companies operating in China face internal protests, external scrutiny and growing political risks. In recent weeks there have been reports that Apple intends to give up parts of its manufacturing facilities in China, the country that has helped make it the world’s most valuable company.

Lowy Institute’s Jennifer Hsu says China’s zero-COVID policy is just the turning point of historic struggles faced by workers there.

“Before COVID, we experienced disruptions at Foxconn factories across China due to lack of safety measures and factory workers’ long hours,” she said.
Foxconn is the largest employer in mainland China and produces Apple products.
In 2010, an inquiry by the Guardian newspaper reported that 18 workers killed themselves while 20 others were stopped.
“These protests and bad conditions have all been documented by groups like ” She said.
Ms Hsu says the China-US trade war is also having an impact on multinationals like Apple.
“One reason is that since then we have seen strategic competition between the US and China [Donald] Trump era,” she said.

“Many analysts are now saying that the decoupling between China and the US is happening in terms of technological dependency.

Man is arrested on the street by three people in white protective clothing.

Security guards in protective gear took away a protester at a Foxconn factory compound in Zhengzhou, central China’s Henan province, in November. Recognition: AP

“Companies like Apple are responding to a range of geopolitical, but also domestic, pressures related to their situation with China.”

After four decades of massive growth, China’s economy is slowing. In October, the International Monetary Fund the second-lowest rate since 1977. However, it is expected to rise to 4.4 percent in 2023 and 2024.
“China’s economy is undoubtedly slowing down,” Ms. Hsu said. “And zero-COVID is a big part of slowing down its economy.”
“Apple is looking at the broader geopolitical landscape. Because multinationals need to address the political risk they may face.”

Legislation on modern slavery has added additional political risk to companies manufacturing in China, as in the US, where products from Xinjiang linked to modern slavery are banned from import.

Xianjiang is home to many Uyghurs and other Turkish minorities.
Backlash over working conditions in China has also mounted from the European Union with the bloc to implement its own ban on Xinjiang products.

What is “political risk”?

Neil Thomas, a senior China analyst at Eurasia Group, a political risk consultancy, says stability is a key factor.
“The main areas of political risk, broadly speaking, are things like the general business environment created by a region’s policies, regulations and laws that are on the books and enforced in a particular country,” he said.

“Creating a stable and predictable environment conducive to investment trade and private economic expansion.”

Mr Thomas says there are a variety of risk factors that are causing multinationals to “reconsider their future investments in China”.
“The first is a kind of secular slowdown in China’s economic growth rate, which means the pace of market expansion will be slower than in the past,” he said.
“This slowdown in China’s growth rate is partly structural, simply because we’ve moved up the value chain and many of the low-hanging fruits of growth from a very small economic base have already been consumed.
“But it has also been exacerbated by high-level policy decisions in recent years, the most obvious being the zero-COVID policy.”
According to a Wall Street Journal report earlier this month, Apple is now planning to shift its operations to other Asian countries such as Vietnam or India.
“Part of that decision is the increasing political risk,” Thomas said.
“Part of this is also rising labor costs in China and the opportunity to save money by manufacturing in less developed countries with lower wages.
“Some of these are political and some are market driven.”
If Apple moves away from China, the process is expected to take several years.
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