China’s central bank has ramped up its scrutiny of the country’s debt and increased its scrutiny of manufacturers, signaling that Beijing is still concerned about a potential slowdown in the world’s second-largest economy. The moves by the People’s Bank of China on Wednesday come as reports surface of unrest at an Apple factory in China that manufactures iPhone 6 and 6 Plus devices. Apple has denied any labor problems, but analysts say the added attention from Beijing could attract other companies to curtail their production activity in China, where growth has slowed in recent months.
China Widens COVID Curbs
China has announced new curbs on imports of coal, oil, and other high-polluting materials in an effort to reduce air pollution and improve public health. The measures include a ban on the import of coal briquettes, a 95% reduction in the number of licenses for importing oil and gas equipment, and a 75% cut in the number of permits for importing high-emitting vehicles. The move comes as China’s economy continues to slow down, with factory unrest adding to worries about future growth.
The restrictions are expected to have a significant impact on China’s industrial sector and could lead to higher prices for goods imported from abroad. However, the announcement is likely to do little to address the country’s long-term air pollution problem, which is blamed for causing tens of thousands of premature deaths each year.
Apple Factory unrest Adds to Economy Worries
Apple Factory unrest Adds to Economy Worries
Reports of unrest at an Apple factory in China have added to economic worries, with the company’s share prices down 0.5% on the news. The unrest began earlier this month when workers at the plant in Zhengzhou went on strike over pay and working conditions. Since then, there have been reports that police are using force to break up protests, with at least two people injured. The strikes come as China’s economy slows down and employers struggle to find enough workers, adding to concerns about broader globaleconomic problems.
What are the Chinese Authorities Doing to Address the Issue?
Since September, when the Chinese authorities announced new COVID restrictions, Apple has faced a number of production disruptions at its plants in China. The first occurred in early September when an unidentified supplier refused to provide Apple with parts for a new iPhone model. This forced the company to stop production of that model and use older parts instead. In October, another supplier delayed shipment of components to two factories operated by Foxconn, an iPhone manufacturer that assembles products for Apple and other companies. That forced both factories to stop production entirely. And last month yet another supplier halted shipment of components to one of the factories operated by Pegatron, another iPhone manufacturer. All four factories have since restarted operations but only after making considerable changes to their work processes.
The incidents appear to be part of broader problems with China’s economy which are exacerbating tensions between Apple and its suppliers. Earlier this year, there were reports that several large Chinese manufacturers were refusing to do business with American companies because they were angry about President Donald Trump’s tariffs on imported goods. And earlier this month, reports emerged that Chinese consumers were stockpiling food as a result of rising prices and fears about food shortages. Combined, these developments have led some analysts to warn that China’s slowdown is becoming more severe than previously thought and could lead to a global recession.
Despite these worries, the Chinese authorities have not made any public statements indicating that they are considering any major policy changes in response to the unrest at Apple’s plants or the overall slowdown
What Lies Ahead for the Chinese Economy?
China’s GDP growth slowed to 6.9% in the second quarter of 2018 from 7.1% in the first quarter and analysts are now projecting that the Chinese economy will grow by 6.5-6.7% this year, which is slower than the 7% rate seen in 2017 but still a healthy pace.
The main culprit for the slowdown in China’s growth was an 11.4% decline in exports compared to last year, which dragged down overall economic activity. However, government officials have pointed to increased domestic demand as a reason for optimism, with consumer spending increasing by 10% over the past 12 months and housing starts reaching their highest level since 2013. In addition, authorities have eased credit requirements and lowered interest rates, both of which are likely encouraging consumers and businesses to borrow money and invest more in order to stay afloat during these challenging times.
Some other factors contributing to China’s slowing economy include increased trade protectionism around the world (particularly from the United States) as well as rising labor costs, which are forcing companies to either reduce hiring or relocate their operations elsewhere in Asia or even overseas altogether. While these challenges are certainly not unique to China – they are also happening in other parts of the world – they continue to put pressure on an already weak economy and generate concerns about potential long-term consequences for global growth .
Despite these headwinds, it is still too early to say whether or not China’s economy will enter a recession . The country
China’s government is continuing its crackdown on corruption, with new curbs announced yesterday that could affect foreign companies doing business in the country. The COVID (Counter-Oversight and Anti-corruption Department) said Wednesday that it had widened its definition of undisclosed paid arrangements to include payments from outside sources. This follows a string of similar announcements this year targeting companies such as Microsoft, Qualcomm, and Huawei. These moves add to worries over the health of China’s economy and are likely to pressure multinationals to review their operations in China.