It’s March. Major Chinese cities are in lockdown, manufacturing is idled, shares are plummeting, and the supply chain is scrambling to make sense of it all. It is a disturbing kind of deja vu. Today’s Covid-19 surge in China appears to mirror the Wuhan outbreak that paralyzed the world in 2020. We have the southern city of Shenzhen in lockdown, forcing iPhone supplier Foxconn Technology Co. Ltd. to shutter plants in the Longhua and Guanlan districts while electric vehicle and battery maker BYD Co. said operations have been impacted. The entire province of Jilin (population 24 million), on the northern border with Russia, has been sequestered and that’s halted production at Toyota Motor Co. and Volkswagen AG plants. The iShares China Large-Cap fund is down 26% for the year. After Wuhan, it had plunged 22%. But there’s a difference between now and two years ago when it comes to semiconductor and big tech supply chains. And that could be crucial to understanding how 2022 plays out — and why a closure of the so-called factory floor of the world may not be so apocalyptic. Manufacturers don’t like to talk about it too much because doing so may annoy Beijing, but Foxconn, Wistron Corp. and Pegatron Corp. have shifted away from China to locales including India, the Americas, Europe and Southeast Asia. At the end of 2020, Foxconn’s Hon Hai Precision Industry Co. had recorded its lowest ratio of long-term assets in China for at least four years. Investment in the Americas grew 10-fold between 2017 and 2020, according to its balance sheet. Western clients, such as Apple, are also becoming more nimble at working around the challenges of flying into and working within China. When the borders were shut in 2020, design and development teams were put on the backfoot trying to prepare a new iPhone while being unable to visit the factories where they’d be made. Production of that year’s devices was delayed by up to two months. While today’s shutdowns in Shenzhen will be an inconvenience, iPhone assemblers now have more capacity overseas, especially in India. Yes, there’s a major war going on. And one concern is that a Ukraine under attack won’t be able to provide some of the noble gases crucial to semiconductor manufacturing. That prospect was chilling for an industry just starting to emerge from 18 months of crippling chip shortages. But it turns out that major players were already prepared and neon can be procured from other places anyway. There’s no doubt that years of supply chain challenges forced companies to be better prepared. Taiwan Semiconductor Manufacturing Co., for example, now holds double the stock piles of raw materials that it did five years ago. In many ways, the rest of the world has prepared to work around China. A similar thing may be happening with the stock market meltdown. The biggest pain is in Chinese technology stocks, especially those listed in the US Analysts at JPMorgan Chase & Co. on Monday summed up a sentiment shared by many when it declared China Internet stocks as “uninvestable” over the next six to 12 months. They downgraded 28 Chinese names listed in the US and Hong Kong. The NASDAQ Golden Dragon China index, which is heavily weight toward tech, fell 10% last Friday, 10.2% on Monday and is down 71% over the past year. A catalyst for the latest selloff was the US Securities and Exchange Commission last week naming five Chinese stocks that might be delisted from American bourses if they fail to comply with auditing requirements. This announcement reminded investors of the ethos that divides the two countries: US regulators require any business listed in the country to be subject to audit, but Beijing forbids Chinese firms from opening up to such inspections. So two separate financial worlds are being shaped. All that might work out just fine for President Xi Jinping and his administration. Plunging prices of Chinese companies on overseas bourses coupled with increased regulatory pressure from Washington could accelerate their delisting from the US and subsequent relisting back home. More than $1.25 trillion has been wiped off the market value of US-listed Chinese stocks over the past year, according to Bloomberg Opinion calculations. Yet these lower valuations would make them more accessible to domestic Chinese institutional and retail investors, who may then enjoy any upside when the economic picture stabilizes and Beijing’s crackdowns on various sectors start to ease. The result of all this geopolitical tension may end up being a massive redistribution of wealth from the US to China, and it’s playing out amid the fog of war, a pandemic, and economic slowdown. Bloomberg