Tough time for Xi as China loses market faith

4 December, 2022 | Pravina Srivastava

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Apple no longer feel comfortable having so much of its business tied up in one area after a year of events that diminished China's standing as a reliable manufacturing hub.

President Xi Jinping’s government has had a tough time dealing with protests in China against the stringent COVID-19 policy because the amount of rage and discontent among the Chinese people has beyond all reasonable limits.

The demonstrations broke out at the largest iPhone manufacturing in the world, located in central China, as workers at the Foxconn facility fought to keep a COVID-19 epidemic under control while sustaining production in time for the busiest holiday season earlier in November.

China no longer a reliable manufacturing hub for Apple:

Following this, Apple has now stepped up its efforts to move some of its production outside of China and has instructed suppliers to prepare more for the product’s assembly in other parts of Asia, including India and Vietnam.

Apple is reportedly aiming to lessen its reliance on Taiwanese assemblers headed by the Foxconn Technology Group. It is being said that Apple has decided to change its manufacturing due to the recent unrest at the “iPhone City” facility in Zhengzhou, China. Up to 300,000 people are employed by Foxconn in Zhengzhou, China, to produce iPhones and other Apple goods. According to market research company Counterpoint Research, it formerly represented around 85% of the Pro series of iPhones.

According to experts and individuals in the Apple supply chain, the instability has caused Apple to no longer feel comfortable having so much of its business tied up in one area after a year of events that diminished China’s standing as a reliable manufacturing hub.

Investors lose faith in China:

Investor confidence took a hit as a result of the annual National People’s Congress’s watered-down support for the real estate industry earlier on March. Support for other sectors won’t be sufficient to counteract the shock in the absence of a bottoming of the difficulties relating to real estate. February saw a quicker decline in property prices in China than the previous month, despite reduced mortgage rates and down payments in some locations.

Investors want a more ambitious pivot, even if doing so would diverge from the central bank’s current framework of policy. One such pivot would be to reduce the down payment ratio in major cities. It would be encouraging if the industry could more easily access the requisite financing, maybe through the creation of a new lending institution.

Investors flocked to encouraging passages in Wednesday’s statement that hinted at the impending end of a regulatory onslaught and demanded that big digital platforms’ “rectification” come to an end “as soon as practicable.” Tencent Holdings Ltd. increased by a record 23%, while IT behemoth Alibaba Group Holding saw a 27% increases.

According to the Directorate of Enforcement (ED), a number of fintech firms and non-banks supported by Chinese investors engaged in predatory lending, breaking RBI regulations and generating more than Rs 940 crore in criminal gains.

M/s Kudos Finance and Investments Pvt Lts, M/s Acemoney (India) Ltd, and M/s Pioneer Financial and Management Services Pvt. Ltd. were among the non-banks. These are NBFCs from India, along with a number of related fintech firms.

However, China’s strategy of lending loans to developing country also cracked down after Bangladesh warning to developing states for China’s BRI lending following the Sri Lanka crisis.