BEIJING, May 30 (Reuters) – China’s zero-COVID policy of continuous surveillance, testing and isolation of its citizens to prevent the spread of coronavirus has shattered much of the country’s economy but created growth bubbles in medical technology. and construction sector.
The Chinese government, the only major country promising to eradicate the coronavirus within its borders, is set to spend more than $ 52 billion (350 billion yuan) this year on testing, new medical facilities, surveillance equipment and other measures against COVID, which will benefit about 3,000 companies, according to analysts.
“In China, companies providing testing services and other related industries are making big money because of the government’s focus on a restraint-based approach to combating COVID,” said Yangong Huang, a global health expert at the Council on Foreign Relations (CFR). ), American think tank.
Register now for FREE unlimited access to Reuters.com
I’m registering
China is striving to have COVID testing facilities a 15-minute walk from everyone in its major cities and continues to impose mass tests at the slightest sign of an outbreak. Hong Kong-based Pacific Securities estimates that this has created a market worth more than $ 15 billion a year for test manufacturers and suppliers.
The government takes care of most of this, either by purchasing test kits or by paying companies to perform tests. Although test prices have fallen since the coronavirus outbreak in early 2020 – to just 50 cents a test – this ongoing demand has helped a number of companies.
Profits for the first quarter more than doubled for Hangzhou-based Dian Diagnostics Group Co Ltd (300244.SZ), one of the largest manufacturers of medical tests in China. His revenue jumped more than 60 percent to $ 690 million, a little less than half of which was for his COVID testing services, almost entirely paid for by the government.
Rival Adicon Holdings Ltd, which received about $ 300 million in mostly state money for its COVID tests in 2020 and 2021, according to the company’s financial statements, has applied for an initial public offering on the Hong Kong Stock Exchange.
Shanghai Runda Medical Technology Co Ltd (603108.SS) said it was processing up to 400,000 COVID tests a day in April, during the nearly two-month blockade of Shanghai, generating more than $ 30 million a month, according to a State Securities Times article .
China is defending its zero-COVID policy as crucial to saving lives and preventing the transfer of its healthcare system. It shows weak signs of withdrawal, even as economic levies rise.
Recent figures show that the country’s economy has weakened sharply since March, as employment, consumer spending, exports and home sales have been hit by severe blocking measures that clog highways and ports, block workers and close factories.
Many private sector economists expect the economy to shrink in the April-June quarter from a year earlier, up from 4.8 percent in the first quarter. The CSI 300 (.CSI300) blue chip index has fallen 19% this year.
Investors are unsure of how long the boom will last for companies such as Dian, Adicon and Shanghai Runda, whose fortunes are closely linked to government spending. On average, analysts expect Dian’s revenue to fall slightly next year as they see the Shanghai Runda continue to grow. Stocks of both have been declining since the beginning of this year.
“The development of the epidemic is uncertain due to the large number of mutated strains of the new coronavirus and the complexity of the infectivity,” said a recent study by the Shenzhen-based Essence Securities. “If the spread of the epidemic is well controlled and the epidemic prevention policy is adjusted, this could have a negative impact on market demand for COVID nucleic acid testing.”
Huang of the CFR said China’s large-scale blockade, tracking and isolation program could prevent a worst-case scenario, but it is not a permanent solution. “Epidemiologically and economically, this is unsustainable,” he said.
Dian Diagnostics, Adicon and Shanghai Runda did not respond to requests for comment. Health officials in Beijing and Shanghai did not respond to requests for comment.
MASS SURVEILLANCE, FAST BUILDINGS
Dozens of manufacturers of surveillance cameras and thermal imaging cameras, such as Wuhan Guide Infrared Co Ltd (002414.SZ) and Hangzhou Hikvision Digital Technology Co Ltd (002415.SZ), have taken advantage of the Chinese government’s search for gadgets that can help it. to monitor the condition of COVID to its 1.4 billion citizens.
Wuhan Guide, one of the world’s leading manufacturers of thermal imaging equipment, doubled its revenue in 2020 as it worked overtime to supply fever detection cameras in China and abroad. Growth slowed last year, but analysts expect it to increase again this year and next. The company did not respond to a request for comment.
Disease is the mother of invention. Since March, Chinese companies and research institutes have filed at least 50 patents related to COVID, according to a Reuters review of international and local databases. The inventions are mainly related to the adaptation of existing cameras and surveillance platforms in order to track close contacts and identify potential positive cases.
The urgent need for hundreds of new hospitals to ease tensions from China’s already sprawling medical infrastructure has boosted some construction companies.
The Beijing-based China Railway Group Ltd (601390.SS), a conglomerate covering construction, manufacturing and real estate, built makeshift hospitals across China this year and has been particularly active in COVID-affected areas such as Shanghai and the northeastern city of Changchun. Its profits have grown steadily over the past two years, at least in part supported by COVID-related projects, and analysts expect this to continue over the next few years. Its shares peaked in three years in May. China Railway Group did not respond to a request for comment.
An analyst estimates that about 300 makeshift hospitals were built around China in a 35-day period between March and April as infections rose, costing more than $ 4 billion.
One third of them are built in and around Shanghai. There are no signs of declining government demand. On May 15, the head of China’s National Health Commission, Ma Xiaowei, called for the construction of what he called “permanent makeshift hospitals” in the leading edition of China’s Qiushi Communist Party, suggesting there would be a long-term need for such buildings.
A Reuters review of tenders for such projects shows the government will spend about $ 15 billion this year on new hospitals.
Register now for FREE unlimited access to Reuters.com
I’m registering
Report by Eduardo Baptista in Beijing Edited by Bill Rigby
Our standards: Thomson Reuters’ principles of trust.
Add Comment