China’s anti-virus spending boosts healthcare, tech and construction Reuters

© Reuters. FILE PHOTO: A worker in protective clothing walks in the Pudong area leading across the Huangpu River during a lockdown to curb the spread of the coronavirus disease (COVID-19) in Shanghai, China, March 28, 2022 tunnel entrance. Reuters/Aly Son

Eduardo Baptista

BEIJING (Reuters) – China’s “zero-coronavirus” policy of constantly monitoring, testing and quarantining its citizens to prevent the spread of the coronavirus has hit much of the country’s economy, but it has created growth bubbles in the healthcare, technology and construction sectors .

The Chinese government, the only major country that has vowed to eradicate the coronavirus within its borders, is expected to spend more than $52 billion (350 billion yuan) this year on tests, new medical facilities, monitoring equipment and other anti-COVID measures, according to analysts , which will benefit up to 3,000 companies.

“In China, companies that provide testing services and other related industries are making big money as the government focuses on a containment-based approach to combating COVID,” said Huang Yanzhong, a global health expert 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 big cities, and to continue mass testing at the slightest sign of an outbreak. Hong Kong-based Pacific Securities estimates that this creates a market for test makers and suppliers worth more than $15 billion a year.

The government is paying for the vast majority of them, either by buying test kits or paying companies to do the tests. Although prices for tests have fallen since the start of the coronavirus outbreak in early 2020 — as low as 50 cents per test — this continued demand has helped many companies.

Hangzhou-based Dean Diagnostics Group Co., one of China’s largest medical test makers, more than doubled its profit in the first quarter. Its revenue rose more than 60% to $690 million, less than half of which went to its COVID-testing services, almost all of which was paid for by the government.

Rival Adicon Holdings Ltd, which received around $300 million in government funding for its COVID tests between 2020 and 2021, has filed for an initial public offering on the Hong Kong stock exchange, according to the company’s financial statements.​​​ .

Shanghai Runda Medical Technology Co Ltd said it processed up to 400,000 daily COVID tests in April and generated more than $30 million in monthly revenue during Shanghai’s nearly two-month lockdown, according to an article by the state-run securities firm. . era.

China’s defense of its “zero-coronavirus” policy is critical to saving lives and preventing overruns in its healthcare system. Even as economic damage mounts, it shows little sign of falling back.

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 clogged highways and ports, stranded workers and closed factories .

Many private-sector economists expect the economy to contract in the April-June quarter from a year earlier, compared with a 4.8 percent expansion in the first quarter. The blue-chip CSI 300 index is down 19 percent this year.

Investors are unsure how long the boom will last for companies such as Telecom, Adicon and Shanghai Runda, whose fortunes are closely tied to government spending. Analysts on average expect e-commerce revenue to decline slightly next year, while Shanghai Runda’s revenue will continue to grow. Shares in both have fallen since the beginning of the year.

“Due to the large number of mutant strains of the novel coronavirus and the complexity of its infectivity, there is uncertainty in the development of the epidemic,” said a recent research report by Shenzhen-based Essence Securities. “If the spread of the epidemic is well controlled, epidemic prevention policies will The adjustment may have a negative impact on the market demand for COVID nucleic acid testing.”

The CFR’s Huang said China’s massive lockdown, trace and quarantine program could prevent the worst, but not a permanent solution. “Epidemiologically and economically, this is not sustainable,” 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.

Mass surveillance, rapid construction

Dozens of manufacturers of surveillance and thermal cameras, including Wuhan AutoNavi and Hangzhou Hikvision Digital Technology Co., have benefited from the Chinese government’s demand for gadgets that can help it track the COVID status of its 1.4 billion citizens .

Wuhan AutoNavi, one of the world’s leading thermal imaging equipment makers, doubled its revenue in 2020 as it worked overtime to supply fever detection cameras in China and overseas. Growth flattened last year, but analysts expect it to pick up again this year and next. The company did not respond to a request for comment.

Disease is the mother of invention. Chinese companies and research institutions have filed at least 50 COVID-related patents since March, according to a Reuters review of international and domestic databases. These inventions are primarily related to retrofitting existing surveillance cameras and platforms to track close contacts and identify potential positive cases.

The urgent need for hundreds of new hospitals to relieve pressure on China’s already stretched medical infrastructure has brought a boom for some construction companies.

Beijing-based China Railway Group Co., a conglomerate covering construction, manufacturing and real estate, has built makeshift hospitals across China this year and has been particularly active in areas hit hard by the coronavirus, such as Shanghai and the northeastern city of Changchun. Its profits have grown steadily over the past two years, thanks at least in part to COVID-related items, and analysts expect that to continue for years to come. Its shares hit a three-year high in May. China Railway did not respond to a request for comment.

About 300 makeshift hospitals were built across China in the 35 days from March to April, at a cost of more than $4 billion, one analyst estimated.

A third of these were built in and around Shanghai. Government demand shows no sign of abating. On May 15, Ma Xiaowei, director of China’s National Health Commission, called for the construction of what he called “permanent makeshift hospitals” in Qiushi, the main publication of the Chinese Communist Party, hinting at long-term demand for such buildings.

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

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