What’s going on with China’s protests?

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. In late November, nationwide protests broke out across China as unrest over the government's zero-covid policy reached breaking point. 

Audio Clip: [00:00:17] Anti-government slogans that were once whispered, now shouted in the streets of Shanghai. 

Sascha: [00:00:24] President Xi's insistence on maintaining a strict COVID zero policy resulted in years of intermittent lockdowns and harsh restrictions in China as the world reopened. China remained shocked. But in the past month, as cases spiked and people dreaded further lockdowns, we saw the biggest protests in China since Tiananmen Square. And now the government has responded by abandoning the strictest of its policies. It's Wednesday, the 14th of December. And today I want to know what's going on in China and what would a reopening mean for the world's second largest economy? To talk about this today, I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, welcome to The Dive. 

Darcy: [00:01:10] Thanks, Sascha.

Sascha: [00:01:11] So this story was front and centre a couple of weeks ago, but it's certainly received less coverage in the last week. What is the latest in China? 

Darcy: [00:01:21] The white paper protests have been almost completely subdued, Sascha. And now, as you said, China has ditched most of its COVID restrictions, including the itinerary cut out, which was a state mandated or compulsory tracking app that people had to use to scan into all public places. 

Sascha: [00:01:37] Before you continue, Darcy, the white paper protests, you're talking about the A4 sheets of paper that we saw Chinese citizens holding up. That was a commentary on the fact that they can't say anything for risk of being censored or having retaliation by the government. 

Darcy: [00:01:54] That's exactly right. It's it's a way of saying a lot without saying anything. But I'm not the right person to speak on this topic, Sascha. So today we've got an expert in who most definitely is the right person. I had a chat with Richard McGregor, who is Senior Fellow for East Asia at the Lowy Institute. Richard is a former Beijing and Washington bureau chief for the Financial Times and he's the author of numerous books on East Asia. Here's my chat with Richard. Richard, thanks so much for joining us on The Dive today. So we're talking about China today and we've seen in the last couple of weeks some really large protests. We haven't seen the size of since potentially Tiananmen Square. Can you set the scene in China today, though, a few weeks after these white paper protests really escalated? 

Richard: [00:02:39] Yes, well, you would have seen that there actually are no protests at the moment. In other words, the security forces stamped them out pretty quickly. And in fact, the whole system in China is set up, the policing system, that is to ensure that nothing like 1999 ever happens again. I mean, I should say it's not unusual to have protests in China. Everywhere you go in China every day, there are all manner of protests, but usually they are hyper local and focussed on local issues like, you know, wage theft or pollution or something like that. The big difference about the protests three weeks ago is they were national and they were networked and they were all about the same thing, you know, Covid zero and highly political. So that's what made them highly unusual. Of course, it's why the authorities were highly alerted and made sure to stamp them out very quickly. 

Darcy: [00:03:37] Richard, some of the videos coming out of China a few weeks ago showed Apple's iPhone factory in Zhengzhou and protests erupting from there. Is that where these protests began or what set them off? 

Richard: [00:03:49] Well, there are a couple of factors. You know, the Apple factory in Zhengzhou, for example, that, by the way, is where 80% of the world's iPhones are made. They've had a little bit of unrest about COVID zero getting into some of the dormitories where the workers live. And the other issue with the the the Apple factories was that, you know, to get extra people in to make up for people who were worried about COVID or who'd run away from the factories, they offered special payment bonuses every month. But then again, they didn't pay them. And so that's what really sparked the protests, people claiming they were underpaid. And that itself was related to clothes. That was kind of one in some respects, you know, an isolated incident. The thing that really set off the nationwide protests was a fire in Urumqi, in Xinjiang, in western China. There was an apartment fire and the fire engines couldn't get close enough to put it out because the building was, you know, all boarded up for COVID isolation. And therefore, basically about ten people, including three children, burned to death. And I think that sort of just had a resonance around the country, and that was the sort of immediate trigger to bring people out onto the streets. 

Darcy: [00:05:09] And, Richard, you said most of the protests have settled now. Is that an indication that people are happy with the response from Xi and the government, or is it just the power of his, I guess, forces to stamp down the protests? 

Richard: [00:05:22] All I know is that absolutely the latter the protests haven't settled. They've been suppressed. You know, they're relatively sophisticated in how they put them down. They don't sort of wade into the crowds with truncheons and beat the crap out of people. They will take people's names. They will film them and identify them through facial recognition. They will visit them at home, bring their parents, ring their employers, try to persuade them if they're not persuaded, arrest a few of them. In fact, it was really remarkable that these protests were sort of snuffed out just a couple of days. We haven't seen one since then, which doesn't mean the discontent is not still there. It just means the authorities can keep it off the streets. 

Darcy: [00:06:06] Yeah. Okay. So Xi and the government have, I guess, relaxed some of their COVID zero policies. Now, can you give us a little bit of an indication of what they've done and whether it's maybe shown the Chinese people that they can have an impact on Xi's decision making? 

Richard: [00:06:22] You know, that's the really fascinating question. You know, why were the restrictions? The curve is zero restrictions, which, you know, the government on eight weeks before it said were there to stay for the moment. Why would they relax? Plus, of course, China's going into winter when in theory the virus will spread more easily and the population is not highly vaccinated. So. So what happened? I think two things happened. One of them was the protests. I think that did move the needle in the leadership. I don't know whether they were surprised by it or whether it played into a factional divide in the leadership where some people had been urging an opening up in the protests, sort of help their case. I think the thing that really penetrated is the fact that COVID zero is basically taking a hammer blow to the economy. You know, is that zero growth for the first six months of this year, just a couple of per cent or more for the rest of the year. And I think the leadership can't tolerate that. Is it become the economic situation, become too severe? And that's probably the main reason that they're about to. 

Darcy: [00:07:27] On and on of again. Do you think we can trust China's the case numbers that they're reporting and the casualties now that they have relaxed these policies? 

Richard: [00:07:36] No, there's no way we can trust the current figures. In fact, they have really stopped recording them in many respects. You know, people have stopped testing. And so we don't have reliable figures in that respect. I think it's a little bit too early to talk about people dying. I don't think we're at that stage yet, although it's likely we will be at some stage. But but now the all the sort of mechanisms which China used to trace COVID cases and individuals, you know, the apps on your phone and all that sort of thing, they've gone almost overnight and that means we don't have any figures. What we do have is just an enormous amount of anecdotal information, you know, from many, many cities now. It's sort of travelling up the Yangtze and the like of mass outbreaks of cases. And so if you look at the pictures of the streets of Beijing and Shanghai at the moment, they look like they're under lockdown because everybody is staying inside or work. You know, workers are too sick to go to work and the like. So this is the funny thing about it is that people predicted this before opening up, is that I think the government has made the population so frightened of COVID that once they did open up, people are too frightened to go outside. They stay at home. So China's opened up, but it still looks like it's a lockdown. 

Darcy: [00:08:56] It's fascinating. 

Sascha: [00:08:57] We're going to hear more of Darcy's interview with Richard in just a moment. But first, let's take a quick break to hear from our sponsors. 

Audio Clip: [00:09:15] People across China are not happy and their anger exploded on the streets for several days.

Audio Clip: [00:09:21] Thousands of protesters took to the streets of Shanghai calling for President Xi Jinping to step down. 

Audio Clip: [00:09:27] This weekend saw protests in cities all across China sparked by opposition to the government's strict COVID lockdowns. 

Darcy: [00:09:34] Richard, we've touched on the, you know, the economy and the impacts of China's COVID zero stance. I saw a few reports during that sort of Zhengzhou outbreak. Apple said that they were thinking about taking away some of their production or reliance on China and maybe moving their operations to other Asian countries. Have you seen that happen anywhere else? So how are companies sort of responding to the protests and China's stance of COVID? 

Richard: [00:10:01] Well, this is a live issue. And one of the interesting reports we've seen out on recent days, you know, one of the reasons for the opening up is that the head of the Taiwanese company, Foxconn, which is the the big contract manufacturer, had written to the leaders and said you've got to open up, otherwise the economy is going to collapse. So that brings us directly to your question about Apple production. You know, it sounds easy in theory and practise. It's not so easy. So let me give you an example. In Zhengzhou, Hunan in central China, where the iPhones are put together, I think there's about 235 factories making 610 different parts which go into the iPhone. Half of them in China and all of them sitting around the the factory where the iPhones are put together. On top of that, the Chinese have mastered the art of logistics, a buy from factory to sort of the the iPhone store is Sydney or Los Angeles in three days. So you can't simply lift up 100 factories out of China, put it in India, put it in Vietnam. Not only that, you can't simply have the same calibre or numbers of workers as skilled workers, Chinese workers who put it all together. So there's no way that Apple can quickly move its production out of China.

Darcy: [00:11:27] Yes, a good point. It's such a big operation, I guess pushing that point a little bit further. We've seen global trade has obviously been affected by China's COVID lockdowns. Do you expect now that China seems to be opening things to normalise quickly, or how long do you think this transition period might take? 

Richard: [00:11:43] I think the answer to that is really uncertain at the moment. You know, it depends how quickly the virus spreads, how quickly China gets vaccinated, how quickly Chinese people, quote unquote, learn to live with the virus. And that will depend on, you know, whether people get really sick and die. And then what numbers because that's happened. That's a big political problem for the government. And of course, any sort of interruption to sort of the, you know, Chinese factory production affects the entire world because China is still basically the workshop of the world. In the first two years of COVID, they had a successful suppression strategy, tip most of their factories open and kept the world supply. Well, it might be different in the next three four months. Already iPhone orders are going to go unfilled over Christmas and into the New Year, and that could happen with all manner of industrial and consumer goods. 

Darcy: [00:12:43] And to close it out, Richard, where you're watching in China now, what what do you think will happen from here on inside the next 6 to 12 months? 

Richard: [00:12:51] Well, I guess the first thing we're watching is what we just discussed. And in other words, looking for all the sort of social media in China on hospitals, queues and hospitals, grieving families and the like, to get a sense in the absence of good official data of how bad COVID is gripping there and whether in fact, there's a trajectory, an obvious trajectory out of that by the time we get to March, April. One of the one of the big problems is that, you know, the biggest travel season in China, domestic travel for the moment is Lunar New Year, Chinese New Year, about February, March, when literally about, you know, 200 million people, 300 million people hit the road back to their ancestral villages, you know, their hometowns and the like. I mean, talk about a Superspreader event. So, you know, that's going to be it's going to be a big litmus test is whether the government allows that to go ahead. And once it's happened, if it does happen, whether there's a clear glide path out of COVID. But, you know, China has not been willing so far to pay a price for opening up, in other words, a health price, which we all have. Now, they're experimenting with that. And I just wonder whether they can hold it. 

Darcy: [00:14:06] Richard, thank you so much for joining us today. 

Richard: [00:14:08] Thank you.

Sascha: [00:14:09] Darcy. That was a fascinating discussion. A great interview with Richard McGregor, it's always so enlightening when we get experts in to come and talk about their area of expertise. What are your key takeaways after talking to Richard?

Darcy: [00:14:22] I think the key things are that China has clearly abandoned its zero-covid policy. But what we're probably going to say now is a lot of short term, medium term problems arising within China. Cases are going to surge. We've got Lunar New Year coming up. Hospitals could be overwhelmed. And there's still this deep fear in many Chinese people of the virus after years of strict anti-covid language. So you can't just switch that off and turn it around. And the other interesting thing to watch or a takeaway is keeping an eye on Xi's stranglehold on power in China. As Richard said, the protest was stamped out very quickly. But it doesn't mean that the discontent with Xi and the government is gone. So something to keep an eye on. 

Sascha: [00:15:02] Absolutely. And we will be watching this closely. A reminder that The Dive is going to take a break next Monday, the 19th of December is going to be our last episode for the year, and we'll be back at the end of January. But if you enjoyed this episode, the best thing that you can do for us as a Christmas present is give us a five star review or send it to a friend who you think might enjoy catching up with our back catalogue over the Christmas break. Remember you can follow us on Instagram. Our handle is @thedivebusinessnews all in one word. You can contact us by email thedive@equitymates.com And you can subscribe wherever you're listening right now so you never miss an episode. Darcy, thank you so much for joining me today. 

Darcy: [00:15:43] Thanks, Sascha. 

Sascha: [00:15:44] Until next time.