Home » Does it frustrate Li Keqiang?Apple and Google send an unusual signal that China’s manufacturing empire is shaking | Li Keqiang | China’s economy | zero policy | economic stimulus |

Does it frustrate Li Keqiang?Apple and Google send an unusual signal that China’s manufacturing empire is shaking | Li Keqiang | China’s economy | zero policy | economic stimulus |

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Does it frustrate Li Keqiang?Apple and Google send an unusual signal that China’s manufacturing empire is shaking | Li Keqiang | China’s economy | zero policy | economic stimulus |

[Voice of Hope, September 2, 2022](Comprehensive report by our reporter He Jingtian)In September, China’s economy entered a critical moment when the CCP virus outbreak broke out again, and Chengdu, with a population of 21 million, entered a state of near-closed city. Faced with a situation even more difficult than in 2020, Li Keqiang held intensive meetings to deploy the stimulus plan. Some financial scholars have analyzed that it is extremely unusual for the State Council to hold frequent meetings, which reflects that the economic pressure has made it “overwhelmed”. However, the measures introduced do not seem to be working and are all offset by the “zeroing” policy.

Li Keqiang presided over a state executive meeting on August 31 to deploy economic stimulus measures.

Li Keqiang promised to use the policy tools that have been reserved in the past two years to stabilize the economy in response to the shock of the economic performance exceeding expectations.

He acknowledged at the meeting that China has faced more difficulties in some areas than in 2020. At that time, in order to control the outbreak of the CCP virus in Wuhan, China implemented a large-scale city closure and control, and the economy almost came to a standstill.

Li Keqiang stressed that it is necessary to keep China’s economy operating in a “reasonable range” and strive for “the best results”, but did not mention the annual economic growth target of about 5.5%.

Li Keqiang also urged that the package of policies to stabilize the economy be further promoted to be effective, and the detailed policy rules should be released in early September, focusing on expanding effective demand and consolidating the foundation for economic recovery.

On August 29, the State Council of the Communist Party of China held the 10th national teleconference on deepening the reform of “delegating power, delegating power, regulating and serving”.

Li Keqiang said at the meeting that this year’s package of policies to stabilize the economy and follow-up policies in response to new challenges will be stronger than in 2020. We must put these policies in place, focus on stabilizing employment and prices, and keep the economy operating within a reasonable range.

‘Zero’ policy offsets stimulus

Free Asia reported on September 2 that according to the analysis of the Chinese financial scholar Commander, Li Keqiang’s introduction of a basket of economic stimulus measures in September was unusual. It really makes the central government “overwhelmed” and difficult to cope with, reaching the threshold that requires a strong pull.

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He said September was a pivotal moment, the last month of the third quarter. If the economy does not improve in September, the economic growth target set at the beginning of the year will be difficult to achieve.

In the first quarter of this year, China’s economy grew by 4.8% without large-scale city closures. In the second quarter, the long-term lockdown in the Yangtze River Delta region dragged down the economic growth throughout the first half of the year, recording only a 2.5% growth in the first six months. Recently, many places in China have been closed and controlled, and the financial and economic circles believe that it is an impossible task to achieve an annual economic growth of 5.5%.

The commander said that Li Keqiang’s many stimulus measures were offset by the ongoing “zero policy”. The number of cases in various parts of China continues to increase, the 20th National Congress of the Communist Party of China is about to be held, and winter is coming again. These series of factors have caused a lot of pressure on the economy. The financial crisis of local governments, the increase of systemic risks, the continuous “explosion” of financial institutions, and the continuous withdrawal of foreign capital, these series of problems are not conducive to the recovery of the economy.

After Shanghai, Chengdu, a Chinese city with a population of more than 20 million, has entered a state of near closure.

Chengdu City, Sichuan Province announced that from 18:00 on September 1, all residents of Chengdu will “stay at home in principle”. Many Chengdu citizens rushed to the vegetable market and supermarket to buy food in large quantities to cope with the state of closure.

In April and May this year, Shanghai entered a total blockade due to the CCP virus epidemic. As China’s largest city and economic center, the closure had serious economic consequences.

According to the statistics bureau of the Communist Party of China, Shanghai’s GDP fell by 13.7% year-on-year in the second quarter.

Although Chengdu’s economy is about half that of Shanghai, the population is not much different. The permanent population of Chengdu is 21 million, which is less than Shanghai’s 25 million.

As an important central city in the southwest, Chengdu is of great significance. Last year, the passenger throughput of Shuangliu International Airport was 40.117 million, ranking second in the country.

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The Wall Street Journal reported on September 2 that this wave of anti-epidemic measures in Chengdu may further inhibit the production and operation of factories of global manufacturers, such as Foxconn Technology Group, which provides assembly services for Apple, as well as Toyota Motor Corporation and Volkswagen.

A Volkswagen spokesman said the company’s Chengdu plant started closed-loop production operations on Thursday evening. A Toyota spokesman said the company was discussing how to respond to Chengdu’s stay-at-home order.

Stocks and industrial metals fell on news of the coronavirus outbreak that added to the downward pressure on China’s economy. Copper, seen as a bellwether for economic growth, fell 2.3 percent. Hong Kong’s benchmark Hang Seng Index closed down 1.79 percent on Thursday.

In addition to Chengdu, Shenzhen has also experienced another outbreak of the CCP virus.

Starting this Monday, dine-in in Luohu and Futian districts in Shenzhen will be suspended, and all takeaways and express delivery will not enter community communities and urban villages. Entertainment venues such as movie theaters, Internet cafes, KTV, scripted entertainment business venues such as script killings, and indoor closed places such as swimming pools are temporarily closed.

The latest data shows that China’s economy slowed down across the board in July, with total retail sales of consumer goods growing by 2.7%, down 0.4% from June. Before the epidemic, the data maintained double-digit growth for a long time. Chengdu and Shenzhen, as large cities with agglomeration of population, have always been the main areas driving consumption growth.

The British BBC Chinese website reported on September 2 that the blockade of more major cities will make the economic recovery worse.

The health of small business owners is of particular concern, said Xu Tianchen, an economist at the Economist Intelligence Unit (EIU). Revenue from corporate operations declined in the first half of the year. Small business owners have been hit harder by the containment measures, many of whom are at risk of having to close their doors amid the sudden and severe lockdown.

The Chinese think tank “Anbang Consulting” said in an email to the BBC that China’s economy is at risk of stalling, and the biggest factor is the impact of the CCP virus epidemic. Compared with the current situation of the epidemic and economic development in the international community, the so-called “epidemic shock” is not actually the epidemic itself, but the impact of epidemic prevention and control policies.

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Xing Ziqiang, chief economist of Morgan Stanley China, reminded that what is more important is whether this leads to permanent scars in the economy, such as consumers starting to adjust future employment expectations, gradually appearing long-term psychological and income scars, and household balance sheets deteriorating, etc. The proportion of households with problems has risen from less than 10% at the beginning of the year to around 24%.

The New York Times reported on September 2 that in the coming weeks, both Apple and Google will launch the latest generation of smartphones, but one of the most important changes in these new products is that some of them are no longer made in China.

A small portion of Apple’s latest iPhones will be made in India, while some production of Google’s latest Pixel phones will be completed in Vietnam, the people said.

The production chains that are moving overseas are not limited to smartphones: Apple is making iPads in northern Vietnam; Microsoft’s Xbox game consoles began shipping from Ho Chi Minh City this year; Amazon already makes Fire TV devices in Chennai, India. A few years ago, all of these products were made in China.

“China’s manufacturing empire is shaking,” said Lior Susan, founder of Eclipse Ventures, which invests in hardware and manufacturing start-ups. “More and more capital is pulling production out of China and looking for alternatives. “

For China, that means manufacturing activity is being taken away from the country at a time when economic growth is slowing to the slowest in decades.

The August Manufacturing Purchasing Managers Index (PMI) released by the National Bureau of Statistics of the Communist Party of China on August 31 was 49.4, which showed that the pillar industries of the Chinese economy were still in a downturn. The important index has contracted five times in the past six months.

The Caixin China Manufacturing Purchasing Managers Index (PMI) released on September 1 recorded 49.5, down 0.9 percentage points from July and below the line of prosperity and decline, indicating that the manufacturing industry is already shrinking.

“Everyone is thinking about evacuating, even if they haven’t moved yet,” said Instrumental founder Anna-Katrina Shedlecki.

Responsible editor: Lin Li

This article or program has been edited and produced by Voice of Hope. Please indicate Voice of Hope and include the original title and link when reprinting.

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