Why China may struggle to escape stagnation

ON A typical evening, Zhengzhou’s manufacturing district should be teeming with workers heading back to their dormitories. For more than a decade, the city of 13 million in central China has been home to Foxconn employees who assemble iPhones in a local megafactory – meaning that activity at hole-in-the-wall eateries and dank Internet cafes provides an informal gauge of the health of the local economy.

But now one of the main dormitory areas is vacant. Labourers are stripping out what remains of Internet cafes and hauling off sofas that once furnished dorms. Many workers fled, never to return, in October last year, escaping a lockdown that had confined them to their dorms, sometimes 10 to a room, for weeks on end.

Zhengzhou has become one of China’s most problematic cities. Gross domestic product per person in Henan province, of which it is the capital, sits at 27 per cent below the national average.