Scam Horror! ‘iPhone City' in China May Be Abusing Covid Controls

A manufacturing hub in central China is allegedly abusing its Covid control measures to prevent investors who say they have been swindled out of billions of dollars in a suspected financial scam from returning to the city to protest.

Several people who claim to have been denied access to their money invested via online platforms said their health codes turned red when they scanned in at the main train station of Zhengzhou, the capital of Henan province, meaning they could no longer move about freely. They had carried green health codes when they left their hometowns, said the people, who declined to be identified for fear of reprisals.

Such alleged use of health-code apps to track people beyond their intended purpose has caused a firestorm, adding to concerns that the strict Covid restrictions imposed in mainland China and Hong Kong are doubling as a form of social control. In Hong Kong, groups of more than four are still banned from gathering outdoors -- though restaurants allow bigger groups at the same table -- and the rule is widely seen as a way of preventing political protests.

A former editor of the Communist Party’s Global Times newspaper said such health code manipulation jeopardizes the public’s support, while the Caixin news outlet warned in an editorial that any abuse of the system could pose a potential threat to society. A human rights lawyer accused the authorities of meddling with his health code to bar him from traveling, the New York Times reported earlier this year.

Phone calls to the Zhengzhou city government and the local health authority went unanswered. An employee handling city government hotline inquiries told local media that there was some error with their so-called Big Data information database and the situation had been reported to the government for rectification.

The latest development came after hundreds of protesters gathered outside the Henan office of China’s banking regulator in late May, demanding that authorities ensure the return of tens of billions of yuan invested in what could be one of the nation’s largest financial scams. Four banks in the province froze online and mobile cash withdrawal services in April, and a probe found that their common shareholder colluded with bank employees to illicitly attract public funds via online platforms. The investigation is ongoing and it’s unclear whether the funds are missing.

China adopts a three-tiered health code color system to keep track of people who may have been infected by Covid, with red indicating the highest level of risk that bars people from entering public places or taking public transport while green grants them access. For tracking purposes, residents are required to scan venue codes for all public places they visit, which will then bring up the health code on their mobile phones for further checking.

There were no risk areas in Zhengzhou or other cities in Henan as of late Monday, according to official data. It was unclear whether the authorities used other criteria to change the local health codes of the people Bloomberg spoke with, who had green health codes when leaving their hometowns. Zhengzhou, known locally as “iPhone city,” is home to the world’s biggest production base for iPhones.

Two of the people said they were taken to a local school once they arrived in Zhengzhou and were told by police to return to their hometowns. Others involved said they tested the health code app from outside the city by scanning Zhengzhou venue codes remotely, only to find they turned red, adding to signs they were being targeted.

The alleged abuse of health code rules prompted a public outcry on Chinese social media, with some calling it a “creative” way of using the system.

Hu Xijin, former editor of the Global Times, posted on his Weibo that local health codes should be used for Covid prevention purposes only, without naming Zhengzhou or Henan.

“If any local government tries to prevent the movement of certain people by controlling their health codes for other purposes, it’s not only a clear violation of Covid prevention rules but also jeopardizes authority of the system and the public’s support,” Hu wrote in his Tuesday post. “It’ll do more harm than good to our social governance.”