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Inside the Covid Rebellion at Phone City’s Zhengzhou Factory

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Managers at the world’s largest iPhone factory breathed a sigh of relief when the local government in Zhengzhou lifted a five-day lockdown in most of the Chinese city on Tuesday.

After more than a month of disruption caused by the Covid-19 outbreak at the plant, a human resources executive at the… Foxconnwhich owns and operates the factory.

But the problems are not over yet. The Taiwanese contract manufacturer is still struggling to staff assembly lines at the height of Apple’s pre-holiday peak season, and delay in delivery Premium iPhone models, almost all of which are made in Zhengzhou, are on the rise.

disorder, and A rare warning for Apple That supply constraints will hamper its revenue growth, highlighting the vulnerabilities created by the US tech giant’s reliance on a Chinese manufacturing model that has turned it into the world’s most valuable listed company.

said a person who has conducted audits of China’s electronic supply chain for more than a decade. “The fault lines were between the company, the subcontractors, and the local government, and that’s been an issue over many years.”

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When Zhengzhou began recording Covid-19 infections in mid-October, Foxconn put its factory under “closed-loop” management, forbidding employees from leaving the site. But as the infection spread within the factory city, many more appeared The workers fled Campus.

Foxconn employees wait to board shuttle buses in Zhengzhou, Henan, China to their home cities in October 2022
Foxconn employees wait to board shuttle buses to their hometown after a reported Covid-19 outbreak in Zhengzhou in October © VCG / Getty Images

Those who remain paint a picture of utter chaos.

A logistics worker surnamed He who has been working with Foxconn for 10 years used to live off site, but he was afraid that he would be shut down from the factory in October, so he moved to the warehouse. “I’ve been living here for half a month,” he said on November 2. “I use a chipboard and fiberboard as the bed and throw on my duvet.”

Although the company notified the workers that they had to be divided into two groups with those who had been working in a five-day quarantine, he managed to stay. “I was only quarantined for a day, after all,” he said.

Others were less fortunate. Fellow workers and relatives at the factory described being forced to be quarantined in locked bedrooms with up to six other workers and little idea of ​​whether or not they had the coronavirus. Others said they received “abnormal” Covid-19 test results and developed symptoms without being formally told they had tested positive for Covid-19.

Since iPhone production was supposed to go into full gear, Foxconn urgently needed new employees after the mass exodus in October. As often happens in times of labor shortages, the company has employed thousands of seasonal workers through local government.

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However, Foxconn registered the temporary hires under the terms used for long-term employees, which are less than the pay promised by the government. This led to violent protests by seasonal workers, which were then forcibly suppressed by the police.

Security personnel attack a demonstrator with batons at a factory compound operated by Foxconn in Zhengzhou, Henan, China, in November 2022.
Violent protests erupted after seasonal workers were paid less than promised by the government. ©AP

To weed out the disaffected, the company offered 10,000 renminbi ($1,414) to those willing to leave — an offer more than 15,000 resonated with, according to two people at the plant. But now, as Foxconn struggles to staff its product lines, it is promising bonuses for new employees and for those who bring in additional staff.

He, the worker, said: “They came up with an idea yesterday, and then changed it today, and maybe change it again tomorrow.” “You never understand what Foxconn is trying to do.”

Foxconn executives said they were quick to respond to the government’s ever-changing demands. One said, “The problem is that we keep facing cases where we don’t have jurisdiction.”

The executive added that thousands of workers were transferred to quarantine facilities at the request of local authorities, who then failed to supply food to those isolated. According to the CEO, Foxconn offered to bring some staff back, but then struggled to get the food out in a timely manner.

The wage hiccups that sparked the riot also appear to have been caused by miscommunication between the company and the local authorities.

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“Many local civil servants like me are not familiar with Foxconn wages, so technically, we can’t promise wages or bonuses,” said an official in Pingdingshan who helped Foxconn recruit local workers. “However, some still make false promises.”

Such problems are deja vu. Throughout Foxconn’s 20-year history of manufacturing for Apple in China, activists have repeatedly accused the company of violating workers’ rights.

One of the most common problems was the use of Student trainees Appointed by the government are like ordinary workers. There have been complaints about workers being paid low wages after brokers promised jobs on terms not confirmed by Foxconn. Some previous instances of worker unrest occurred in factory accommodations but were managed by outside contractors.

Foxconn’s heavy reliance on local government, middlemen and subcontractors began in response to the company’s worst disaster: yet wave of suicide While workers at its then-largest factory in Shenzhen in 2010 drew global scrutiny, management attempted to adjust the factory city model.

Customers look at the iPhone 14 at an Apple Store in Beijing, China in November 2022
Delays in deliveries of premium iPhone models mount as Foxconn struggles to staff assembly lines © Wu Hao / EPA-EFE

One conclusion was that it would no longer own and operate all the same facilities. Foxconn founder Terry Gou at the time also vowed to replace many workers with robots, and demanded that customers bear a greater share of the financial burden needed to keep an increasingly demanding workforce happy.

However, the only major change that was made was to shift production inland, where wages were still lower than in the more developed coastal provinces of China.

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But the hubbub of Zhengzhou suggests that even this setup is not sustainable. Foxconn Chairman Yong Liu told investors this month that the expansion of manufacturing outside of China was driven by geopolitics rather than a zero-Covid policy. But industry insiders said the factory disruptions are meant to accelerate Apple’s efforts to diversify its supply chain.

Although Foxconn and its smaller peers have set up factories in Vietnam, Indonesia and India, that capacity is minuscule compared to China.

“We may only have reached a completion rate of 10 to 15 percent if we expect Southeast Asia and India’s capacity to be on par with China,” said Patrick Chen, head of research at CLSA in Taiwan.

“It’s going to be very difficult to ramp this up, but Apple now has a stronger incentive,” said a senior executive at a rival iPhone assembly company. “The lesson from this has to be that supply needs to be more spread out.”

Additional reporting by Katherine Hill in Taipei, Nian Liu and Ryan McMorrow in Beijing, and Keaner Liu and Gloria Lee in Hong Kong

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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