A Beijing Crackdown on COVID Protests Could Have Same Economic Effect as Lockdowns on America: Expert

Security personnel in protective clothing attack a protester with clubs after he grabbed a metal pole that had been used to strike him during a protest at the factory compound operated by Foxconn Technology Group which runs the world’s biggest Apple iPhone factory in Zhengzhou in central China’s Henan Province on Nov. 23, 2022. AP

Beijing’s potential crackdown on COVID protests could have the same economic effect as the lockdowns on America, says Milton Ezrati, Chief Economist at the financial communications agency Vested.

“The protests, especially if the [Chinese] government cracks down on them, are going to have, from an economic standpoint, the same effect as the lockdowns. They will interrupt business, and they will be a burden on supply chains to the United States,” Ezrati told NTD’s “China in Focus” program.

Economist Milton Ezrati explains the Evergrande situation The Epoch Times

He further noted that the lockdowns have had a devastating effect on the Chinese economy.

An annual business report released by the American Chamber of Commerce in Shanghai (AmCham Shanghai) on Oct. 28 showed that only 55 percent of the companies surveyed were optimistic, or slightly optimistic, about China’s five-year business outlook—a significant 23-point drop from 2021.

The report also disclosed that only 17 percent of the companies surveyed said the country’s policies and regulations toward foreign companies had improved in the past year, a 19 percent drop from 2021.

“They have also had an effect on supply lines that the West—the United States, in particular—counts on. And that is having a long-term effect on U.S.-China, not just relations, but the business arrangements,” Ezrati said.

He further described how the lockdown triggered by Beijing’s zero-COVID measures severely impacted the supply chain.

“When you are trying to get supplies out of China, it’s very frustrating. And then, of course, in the recovery in the West, there was tremendous upheaval, because they couldn’t get supplies out of China.

“Had they recovered the way the rest of the world has allowed economic activity to come back, the way Europe and the United States did, there'd be less pressure on people like Apple and others who saw us in China to find alternatives, whether in India or Vietnam or Indonesia—or even Taiwan,” said Ezrati.

Wave of Running Away

In Ezrati’s view, the lockdowns have driven foreign companies out of China.

“I think Apple and a lot of the manufacturers, the Americans who have operations in China, have been effectively rethinking their relationship since 2020 … the manufacturers, the American businesses, are trying to diversify,” he said.

In a 2020 survey conducted by research firm Gartner, roughly one-third of supply chain leaders responded that they had plans to move at least some of their manufacturing out of China before 2023. A study conducted by UBS Evidence Lab found that 76 percent of U.S. companies with manufacturing in China were either in the process of or planning to shift operations to other countries.

In the economist’s opinion, the Biden administration is also “pressuring people indirectly to get out of China.”

Ezrati pointed to the CHIPS and Science Act signed into law in August which allocates $280 billion in subsidies, tax breaks, and research grants to prop up the domestic semiconductor industry.

“[Biden] has now moved with the CHIPS and Science Act to not only subsidize chip manufacturing in the United States, which of course is a response to supply chains, but it’s also a nationalist movement,” he said.

“He has blocked the sale of high-tech chip manufacturing products to China, which is a direct attack,” Erzati added, referring to the Oct. 7 announcement of the U.S. Department of Commerce imposing new export restrictions on advanced semiconductors and chip-manufacturing equipment to prevent American technology from being used for China’s military development.

No Trend of Decoupling From US

The expert further denied that China wants to disengage from the United States.

“I don’t think China has a policy of decoupling from the United States,“ Ezrati said. ”They would very much like to still have the United States as a market.”

“In fact, selling to the United States is a mainspring of their economy. And their economy, of course, is a mainspring of the party’s political, diplomatic, and I guess military ambitions,” he added.

China is the United States’ third-largest trade partner. China’s exports to the United States were $577.13 billion during 2021, according to the United Nations COMTRADE database on international trade.

“The United States, of course, is backing away, for security reasons, commercial reasons, and for the fact that the United States has turned toward a more nationalist approach to economics in the past couple of three years, almost seamlessly from Trump to Biden,” Ezrati said.

Antonio Graceffo and Kathleen Li contributed to this report.