BEIJING, May 30 (Reuters) - China's 'zero-COVID' policy of
constantly monitoring, testing and isolating its citizens to
prevent the spread of the coronavirus has battered much of the
country's economy, but it has created bubbles of growth in the
medical, technology and construction sectors.
The Chinese government, alone among major countries in
vowing 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 as many as
3,000 companies, according to analysts.
"In China, the companies that provide testing services and
other related industries are making big money because of the
government's focus on a containment-based approach in fighting
COVID," said Yanzhong Huang, a global health specialist at the
Council on Foreign Relations (CFR), a U.S. think tank.
China aims to have COVID testing facilities within
15-minutes' walk of everyone in its big cities and continues to
impose mass testing at the slightest sign of an outbreak. Hong
Kong-based Pacific Securities estimates this has created a
market worth more than $15 billion a year for test makers and
The government is footing the bill for the vast majority of
this, either by buying test kits or paying companies to do
tests. Although prices of tests have dropped since the outbreak
of the coronavirus in early 2020 to as little as 50 cents per
test - this continuing demand has helped a number of companies.
First-quarter profit more than doubled for Hangzhou-based
Dian Diagnostics Group Co Ltd, one of China's
biggest medical test makers. Its revenue jumped more than 60% to
$690 million, just less than half of which was for its COVID
testing services, almost entirely paid for by the government.
Rival Adicon Holdings Ltd, which received about $300 million
of mostly government money for its COVID tests over 2020 and
2021, according to the company's financial statements, has
applied for an initial public offering on the Hong Kong stock
Shanghai Runda Medical Technology Co Ltd said it
was processing up to 400,000 COVID tests per day in April,
during the almost two-month-long lockdown of Shanghai,
generating more than $30 million a month, according to an
article by the state-run Securities Times.
China defends its 'zero-COVID' policy as crucial to saving
lives and preventing its healthcare system from being overrun.
It shows little sign of pulling back even as the economic toll
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 stringent lockdown
measures that clogged highways and ports, stranded workers and
Many private-sector economists expect the economy to shrink
in the April to June quarter from a year earlier, compared with
the first quarter's 4.8% growth. The blue-chip CSI 300 Index
is down 19% this year.
Investors are uncertain how long the boom will last for
companies like Dian, Adicon and Shanghai Runda, whose fortunes
are closely tied to government spending. Analysts, on average,
expect Dian's revenue to dip slightly next year, while they see
Shanghai Runda's continuing to grow. Stocks of both are down
from the start 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 infectiousness," said a recent research note by
Shenzhen-based Essence Securities. "If the spread of the
epidemic is well controlled and the epidemic prevention policy
is adjusted, it may have a negative impact on the market demand
for COVID nucleic acid testing."
Huang at the CFR said that China's massive program of
lockdowns, tracing and isolating could prevent a worst-case
scenario but was not a permanent solution. "Epidemiologically
and economically, it is unsustainable," 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, QUICK BUILDINGS
Dozens of surveillance and thermal imaging camera
manufacturers, such as Wuhan Guide Infrared Co Ltd
and Hangzhou Hikvision Digital Technology Co Ltd,
have benefited from the Chinese government's demand for gadgets
that can help it keep track of the COVID status of its 1.4
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-detecting cameras across China
and overseas. Growth flattened out 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 has been 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 track close contacts and identify potential positive
The urgent need for hundreds of new hospitals, to take the
strain off China's already-stretched medical infrastructure, has
created a boom for some construction companies.
Beijing-based China Railway Group Ltd, a
conglomerate spanning construction, manufacturing and real
estate, has built makeshift hospitals all over China this year,
and has been particularly active in areas hit hard by COVID such
as Shanghai and the northeastern city of Changchun. Its profit
has grown steadily over the past two years, at least partly
helped 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
One analyst has estimated that about 300 makeshift hospitals
were built around China during a 35-day span between March and
April, as infections surged, at a cost of more than $4 billion.
One third of those were built in and around Shanghai.
There is no sign of waning demand from the government. On May
15, China's National Health Commission head Ma Xiaowei called
for the construction of what he called "permanent makeshift
hospitals" in leading Chinese Communist Party publication
Qiushi, suggesting that there will be a long-term need for such
A Reuters review of tenders for such projects suggest the
government will spend about $15 billion this year on new
(Reporting by Eduardo Baptista in Beijing
Editing by Bill Rigby)