Zero-Covid, Big Money: China’s Anti-Virus Spending Boosts Medicine, Technology and Construction

BEIJING (Reuters) – China’s “no virus” policy of constant monitoring, testing and isolation of its citizens to prevent the spread of the coronavirus has hurt much of the country’s economy, but has created bubbles of growth in the medical, technology and construction sectors.

The Chinese government, alone among the major countries that have pledged to eradicate the coronavirus within its borders, is on track to spend more than $52 billion (350 billion yuan) this year on testing, new medical facilities, monitoring equipment and other anti-COVID measures, which will benefit up to 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 containment-based approach to fighting COVID,” said Yanzhong Huang, a global health specialist at the Council on Foreign Relations (CFR). ), an American think tank.

China aims to have COVID testing facilities within a 15-minute walk of everyone in its major cities and continues to impose mass testing at the slightest sign of the outbreak. Hong Kong-based Pacific Securities estimates that this has created a market of more than $15 billion annually for test makers and providers.

The government bills the vast majority of this, either by buying test kits or paying companies to run the tests. Although test prices have fallen since the coronavirus outbreak in early 2020 – to less than 50 cents per test – this continued demand has helped a number of companies.

Hangzhou-based Dian Diagnostics Group Co Ltd (300244.SZ), one of China’s largest medical test manufacturers, has doubled first-quarter profit. Its revenue jumped more than 60% to $690 million, with less than half of that coming from COVID testing services, which the government paid almost entirely.

Rival Adicon Holdings Ltd, which received about $300 million in government money mostly for its COVID tests during 2020 and 2021, according to the company’s financial statements, filed 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 per day in April, during Shanghai’s nearly two-month lockdown, generating more than $30 million per month, according to a Times Securities article that State run.

China is defending the ‘zero COVID’ policy as necessary to save lives and prevent its health care system from being overrun. It shows little sign of abating, even as economic losses mount.

The latest indicators show the country’s economy has weakened sharply since March, as employment, consumer spending, exports and home sales have been hit by strict lockdown measures that have shut down highways and ports, stranded workers and shuttered factories.

Many private sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared to first-quarter growth of 4.8%. The excellent CSI 300 (.CSI300) Index is down 19% this year.

Investors are unsure how long the boom will last for companies such as Dian, Adicon and Shanghai Runda, whose fortunes are closely tied to government spending. Analysts, on average, expect Dianne’s revenue to decline slightly next year, while seeing Shanghai Ronda continue to grow. Stocks of both have fallen since the beginning of this year.

“The evolution of the epidemic is uncertain due to the large number of mutated strains of the novel coronavirus and the complexity of infection,” said a recent research note issued by 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.”

CFR’s Huang said China’s massive program of lockdowns, tracing and isolation could prevent a worst-case scenario but was not a permanent solution. “It is unsustainable from both an epidemiological and economic point of view,” he said.

Dian Diagnostics, Adicon and Shanghai Runda did not respond to requests for comment. Health authorities in Beijing and Shanghai did not respond to requests for comment.

Comprehensive monitoring, fast buildings

Dozens of surveillance and thermal imaging camera manufacturers, such as Wuhan Guide Infrared Co Ltd (002414.SZ) and Hangzhou Hikvision Digital Technology Co Ltd (002415.SZ), have benefited from the Chinese government’s demand for tools that can help it track the COVID status of its number of citizens. 1.4 billion people.

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 throughout China and abroad. Growth slowed last year, but analysts expect it to rebound again this year and next. The company did not respond to a request for comment.

Disease was the mother of invention. Since March, Chinese companies and research institutes have filed at least 50 COVID-related patents, according to a Reuters review of international and domestic databases. The inventions are mostly related to adapting existing surveillance cameras and platforms in order to trace close contacts and identify potential positive cases.

The urgent need for hundreds of new hospitals, to relieve the pressure on China’s already filled medical infrastructure, has led some construction companies to thrive.

Beijing-based China Railway Group Ltd (601390.SS), a conglomerate spanning construction, manufacturing and real estate, has built temporary hospitals across China this year, and has been particularly active in COVID-hit areas such as Shanghai and the Northeast. Changchun City. Its earnings have grown steadily over the past two years, helped at least in part by COVID-related projects, and analysts expect that to continue over the next few years. Its stock hit a three-year high in May. China Railway Group did not respond to a request for comment.

One analyst estimated that about 300 temporary hospitals were built across China during the 35-day period between March and April, with the number of infections rising, at a cost of more than $4 billion.

A third of these buildings were built in and around Shanghai. There is no sign of waning demand from the government. On May 15, China’s National Health Commission Chairman Ma Xiaowei called for the construction of what he called “permanent temporary hospitals” in a leading CPC circular Kiyoshi, indicating that there would be a long-term need for such buildings.

A Reuters review of tenders for such projects indicates that the government will spend about $15 billion this year on new hospitals.

(Reporting by Eduardo Baptista in Beijing; Editing by Bill Rigby)

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