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China protests: should overseas investors be getting concerned?

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Recently the surge of Chinese protests has been attracting some attention internationally, but what was the cause? What may happen? And how will this affect Chinese equities and general China sentiment among investors?

The main reason for the protests has been the Zero COVID policy and the lock downs (twice) which have slowed most of the economic activities in China. These lockdowns and the daily COVID tests have really ramped up people’s frustration. Before this national scale huge protest, there were also a few smaller sized protests, including for example the Foxconn protest which led to the reduced production of Apple’s iPhone 14.

The event leading to this national protest was a fire accident which happened in Urumqi; the fire lasted three hours and people in China think it cost more damage and deaths than necessary before it was put out. Because of strict COVID restrictions, fire fighters could not get to the fire speedily enough. Anger developed on the back of suspicions that the local officials were reporting lower levels of damage than in reality. President Xi did not say anything about the fire but instead called the Governor-General of Solomon Islands about an earthquake.

Will China stick with a zero Covid policy?

Many Chinese citizens took to the streets to ‘have a walk’, some even chanted some very political statements which are extremely rare in China. More are just saying ‘we want freedom, no more lock down’. The protests are mostly against the Zero Covid Policy, and in remembrance of victims of the fire accident.

After the fire and the initial protest in Urumqi, local government officials announced that the city has ‘basically reached its zero Covid target’ and that they will open up the low-risk areas. Some of the Beijing residential area has also opened up, following pressure from the local population. This shows the protest is putting some pressure on China’s strict policy, potentially letting the country restore some of its production power.

But the official statement seems still to be really emphasizing the importance of keeping the ‘Zero Covid’ policy. Xinhua News Agency, the official state news agency, published three articles emphasizing and reiterating the need to unswervingly implement the “dynamic zeroing” policy, and mentioned detailed pandemic prevention measures.

Prospect of some strikes

On the other hand, online forum users are suggesting a huge wave of strikes are happening, in order to protest against the government. This will intensify the supply chain issue, which has already made Apple move some of its production to India. International companies with the biggest investments in China face the most risk if the government refuses to budge, and Chinese stocks would take a hit if these waves of strike spread around China.


These protests would also affect consumer sentiment, and cause more economic harm. With the limitation on fiscal and monetary stimuli, especially because of spending on the war with Covid, this situation is definitely now awkward for President Xi. He faces a choice between the retraction of his ‘Zero Covid’ Policy, easing up on the lock down, and restoring some day-to-day economy activities, or forcing people not to group together and shut everyone up.

Let us not forget, there is still a concern over reunification of Taiwan, and it is an increasing one: President Xi might want to move the focus of the country onto something else, that unites most of the people in China.

Shares in Apple stock have been relatively rangebound as the protests have continued and it does not look as if investors see China as a major risk factor for the company. Stock remains in the $150-160 range, one it has pursued since early October. Hong Kong’s Hang Seng index has rallied since the end of October, reflecting more optimism as local lockdowns have been raised. It is up from around 15,500 to close at 18.736 today.

Shanghai’s Composite Index is also in cautious rally mode having hit a recent low of 2889 at the end of October. Overall the investment market seems cautiously optimistic that China will start to open up further. Oil traders are less convinced, with many fearing ongoing closure of China’s heavy industry is going to impact demand for oil over the winter. Spot oil is flirting with $94 this week having rallied slightly off the $90 level.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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