China’s Covid-19 management and citizen surveillance may deter foreign investment, says GlobalData

Following the news that China has rolled out software surveillance to monitor quarantined people and track the spread of the coronavirus (Covid-19);

Stuart Ravens, Chief Analyst at GlobalData, a leading data and analytics company, offers his views on the increasing complexity of doing business in China post-Covid-19:

“In the aftermath of Covid-19, most companies’ main objective will be to cut costs wherever they can. Some may wish to accelerate a move to lower-cost regions. China’s economic growth has been underpinned by being the factory of the world. However, its approach to Covid-19 reporting, highlighted by recent announcements that asymptomatic patients will only now be added to infection statistics, could be another nail in the coffin for post-Covid-19 foreign investment. China’s Covid-19 reporting has been less than clear and companies will not want to risk exposing their staff to infection when travel bans are lifted.

“Potential investors’ concerns do not stop there. China’s lockdown exposed many companies’ overreliance on China, which will likely lead to diversification in worldwide manufacturing, away from China.

“Also, China’s Social Security system becomes mandatory this year and will make doing business in China even more complex, subtle, and politically sensitive. It could result in possible non-business-related punishments and rewards for foreign companies and the individuals running them, while making them essentially open books to the Chinese government.

“China’s Cybersecurity laws give the state access to files, contracts, copyrights, business statistics, and phone records, without the need to ask permission. This, plus other data sourced from China’s ubiquitous surveillance infrastructure, will be fed into a centralised system and used to quantify the moral codes or Social Security rankings of companies and their key employees, and reward and punish them accordingly. Millions of Chinese have been banned from travelling on trains and planes as a result; others have earned their children admission to the schools of their choice.

“With far from transparent Covid-19 reporting, supply chain concerns, an ethically dubious approach to citizen control, and authoritarian approaches to foreign company disclosure, China looks a lot less of an attractive place for foreign investment.”

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