China’s “zero COVID” policy of constantly monitoring, testing and isolating its citizens to prevent the spread of COVID-19 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 US$52 billion this year on testing, new medical facilities, monitoring equipment and other disease prevention measures, which would benefit as many as 3,000 companies, analysts say.
“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 (黃延中), a global health specialist at the Council on Foreign Relations, a US think tank.
Photo: Reuters
China aims to have COVID-19 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 Co (太平洋證券) estimated that this has created a market worth more than US$15 billion a year for test makers and providers.
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 COVID-19 — to as little as US$0.50 per test — this continuing demand has helped a number of companies.
First-quarter profit more than doubled for Hangzhou-based Dian Diagnostics Group Co (迪安診斷集團), one of China’s biggest medical test makers. Its revenue jumped more than 60 percent to US$690 million, just less than half of which was for its COVID-19 testing services, almost entirely paid for by the government.
Rival Adicon Holdings Ltd (艾迪康控股), which received a total of about US$300 million of mostly government money for its COVID-19 tests in 2020 and last year, the company’s financial statements showed, has applied for an initial public offering on the Hong Kong stock exchange.
Shanghai Runda Medical Technology Co (上海潤達醫療) said it was processing up to 400,000 COVID-19 tests per day in April, during the almost two-month-long lockdown of Shanghai, generating more than US$30 million a month, an article by the state-run Securities Times said.
Investors are uncertain 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 Dian’s revenue to dip slightly next year, while they see Shanghai Runda’s continuing to grow.
“The development of the epidemic is uncertain due to the large number of mutated strains of the new coronavirus and the complexity of infectiousness,” Shenzhen-based Essence Securities Co (安信證券) said a recent research note. “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.”
Dozens of surveillance and thermal imaging camera manufacturers, such as Wuhan Guide Infrared Co (武漢高德紅外) and Hangzhou Hikvision Digital Technology Co (杭州海康威視), have benefited from the Chinese government’s demand for gadgets that can help it keep track of the COVID-19 status of 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-detecting cameras across China and overseas.
Growth flattened out last year, but analysts expect it to pick up again this year and next.
Disease has been the mother of invention. Since March, Chinese companies and research institutes have filed at least 50 patents related to COVID-19, a Reuters review of international and domestic databases showed.
The inventions are mostly related to adapting existing surveillance cameras and platforms to track close contacts and identify potential positive cases.
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 (中國中鐵), 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-19 such as Shanghai and the northeastern city of Changchun.
Its profit has grown steadily over the past two years, at least partly helped by projects related to COVID-19, and analysts expect that to continue over the next few years.
One analyst estimated that about 300 makeshift hospitals were built around China as infections surged during a 35-day span between March and last month, at a cost of more than US$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, Chinese National Health Commission Minister Ma Xiaowei (馬曉偉) called for the construction of what he called “permanent makeshift hospitals” in leading Chinese Communist Party publication Qiushi, suggesting that there would be a long-term need for such buildings.
A Reuters review of tenders for such projects predicted that the government would spend about US$15 billion this year on new hospitals.
China’s economic planning agency yesterday outlined details of measures aimed at boosting the economy, but refrained from major spending initiatives. The piecemeal nature of the plans announced yesterday appeared to disappoint investors who were hoping for bolder moves, and the Shanghai Composite Index gave up a 10 percent initial gain as markets reopened after a weeklong holiday to end 4.59 percent higher, while Hong Kong’s Hang Seng Index dived 9.41 percent. Chinese National Development and Reform Commission Chairman Zheng Shanjie (鄭珊潔) said the government would frontload 100 billion yuan (US$14.2 billion) in spending from the government’s budget for next year in addition
Advanced Micro Devices Inc (AMD) suffered its biggest stock decline in more than a month after the company unveiled new artificial intelligence (AI) chips, but did not provide hoped-for information on customers or financial performance. The stock slid 4 percent to US$164.18 on Thursday, the biggest single-day drop since Sept. 3. Shares of the company remain up 11 percent this year. AMD has emerged as the biggest contender to Nvidia Corp in the lucrative market of AI processors. The company’s latest chips would exceed some capabilities of its rival, AMD chief executive officer Lisa Su (蘇姿丰) said at an event hosted by
Sales RecORD: Hon Hai’s consolidated sales rose by about 20 percent last quarter, while Largan, another Apple supplier, saw quarterly sales increase by 17 percent IPhone assembler Hon Hai Precision Industry Co (鴻海精密) on Saturday reported its highest-ever quarterly sales for the third quarter on the back of solid global demand for artificial intelligence (AI) servers. Hon Hai, also known as Foxconn Technology Group (富士康科技集團) globally, said it posted NT$1.85 trillion (US$57.93 billion) in consolidated sales in the July-to-September quarter, up 19.46 percent from the previous quarter and up 20.15 percent from a year earlier. The figure beat the previous third-quarter high of NT$1.74 trillion recorded in 2022, company data showed. Due to rising demand for AI, Hon Hai said its cloud and networking division enjoyed strong sales
TECH JUGGERNAUT: TSMC shares have more than doubled since ChatGPT’s launch in late 2022, as demand for cutting-edge artificial intelligence chips remains high Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday posted a better-than-expected 39 percent rise in quarterly revenue, assuaging concerns that artificial intelligence (AI) hardware spending is beginning to taper off. The main chipmaker for Nvidia Corp and Apple Inc reported third-quarter sales of NT$759.69 billion (US$23.6 billion), compared with the average analyst projection of NT$748 billion. For last month alone, TSMC reported revenue jumped 39.6 percent year-on-year to NT$251.87 billion. Taiwan’s largest company is to disclose its full third-quarter earnings on Thursday next week and update its outlook. Hsinchu-based TSMC produces the cutting-edge chips needed to train AI. The company now makes more