“Everything is bitter, but Paris is sweeter” is the English translation of a Chinese phrase circulating on Chinese social media, reflecting the Chinese people’s hardship under the ruling communist regime’s lengthy Zero-COVID policy.
Zero-COVID is a policy of lockdowns enacted on entire cities and regions even when there are only a few cases of COVID-19.
The phrase expresses support for a famous western bakery chain, Paris Baguette, which provided affordable bread to hungry Shanghai residents in April—the hardest period of food shortage during the lockdown. But the bakery was fined 585,000 yuan (about $84,000) by the city’s market supervisor because allegedly “the production license did not match the actual sales location.”
The zero-COVID policy is destroying the country’s status as the world’s factory, with large numbers of companies going bankrupt and large numbers of people suddenly losing their jobs.
In the first half of 2022, a total of 460,000 companies declared bankruptcy across China, and approximately 3.1 million individual business owners deregistered their companies, according to Zheng Yuhuang, a marketing professor at the Institute of Economics and Management of Tsinghua University.
Chinese Manufacturing Hubs Crippled by Zero-COVID
This year has seen many enterprises in Guangdong close. It is the main manufacturing province in China.
Alco Electronics, a producer of small electronic devices such as notebooks, tablet PCs, and stereos, announced on Aug. 30 that it would close its production line in Dongguan in Guangdong Province the next day. It said its export business had been crippled since the COVID-19 outbreak in early 2020. Almost 600 people were affected by the closure.
A similar closure notice issued on Aug. 29 came from Goodway Electrical, a prestigious home appliance brand. The company was a Hong Kong-based electrical goods manufacturer that had been operating in Shenzhen for 38 years.
Goodway Electrical produced electric irons, ovens, electric fans, rice cookers, vacuum cleaners, and other home appliances, and its clients covered more than 50 countries around the world.
Dongguan is also an important processing base for Chinese garments, textiles, toys, chemical materials, and other products.
In August, Kaishan Toys, a Hong Kong-owned toy manufacturer, announced that it would close its Dongguan factory after a decline in orders and payroll difficulties.
On Aug. 30, Dongguan Hongpeng Textile Company issued a notice to furlough employees until next February, citing a supply chain shortage caused by the pandemic.
The day before, another knitwear company in Dongguan, Kaiwei Knitting Clothing, also closed.
In March, Nanzha International Stationery, a Hong Kong-owned company in Dongguan, announced the closure of its business due to the impact of the pandemic.
The Guangdong provincial authority in August released a 14th Five-Year (2021–2025) plan for the manufacturing industry, listing Guangzhou, Shenzhen, Foshan, and Dongguan as key industry cluster bases.
Dongguan’s electronic information manufacturing industry had a total output of nearly 1 trillion yuan ($143.8 billion) in 2020. Most of the zero-COVID lockdowns began later.
Plants operations were suspended from time to time due to logistical disruptions and raw material shortages following the implementation of strict anti-epidemic measures in Shanghai and its neighboring provinces, another major economic and manufacturing hub in China.
Foreign Companies Withdrawing From China
As of Sept. 2, at least 33 cities remained in partial or complete zero-COVID lockdown, as reported by the BBC.
Ongoing mandatory quarantine and frequent massive testing are encouraging foreign companies to get more serious about moving out of China, according to a report released by A.T. Kearney, a management consulting firm.
The report found that as many as 92 percent of participating CEOs expressed positive attitudes about reshoring to the United States; 79 percent of executives in the manufacturing sector said they have already moved some business back to the United States or plan to do so within the next three years; 15 percent are evaluating similar plans.
In an April interview with The Market, a Swiss media, Joerg Wuttke, president of the European Union Chamber of Commerce in China, said that China is losing its reputation as the world’s best sourcing destination and that for the first time he is seeing some companies looking to other Asian countries for sourcing.