Why China Is Struggling To Pay For Its Failing Zero Covid Policy

There is a circular illogic to the Chinese 'zero Covid' policy which is making it harder to finance: the central government under Xi evidently believes the pandemic undermines its harshly growing power and so its demands to stop the pandemic grow more strident. 

But the lockdowns and expense of diverting funds to systems to insure frequent mandatory are both expensive - and divert people from working, draining business coffers and tax revenues. The question is how long this charade can be maintained before even more protests break out - or the government drives the economy into recession. JL 

Alexandra Stevenson and Zixu Wang report in the New York Times:

By testing every citizen several times a week, the authorities hoped to isolate cases more quickly and avoid future crippling lockdowns. But in recent months that approach has failed to slow some of China’s biggest outbreaks. Now, the mass testing program that has become the cornerstone of China’s “zero-Covid” strategy appears to be foundering, even as it remains a fixture of the country’s urban landscape and balloons into a multibillion-dollar business. For local governments already under pressure to stimulate a slowing economy, building a testing network as large of those in Shanghai and Beijing has created a huge financial strain.

As a stubborn strain of Covid-19 rippled through China this year and forced hundreds of millions of people into lockdown, officials turned to a new tool: regular mass P.C.R. testing. By testing every citizen several times a week, the authorities hoped to isolate cases more quickly and avoid future crippling lockdowns.

But in recent months that approach has failed to slow some of China’s biggest outbreaks. Now, the mass testing program that has become the cornerstone of China’s “zero-Covid” strategy appears to be foundering, even as it remains a fixture of the country’s urban landscape and balloons into a multibillion-dollar business.

Desperate to isolate recent outbreaks, health workers have resorted to barricading buildings and even cordoning off single individuals in public spaces. Nearly two hundred million people are in some form of lockdown in China. In every village, town and city, testing requirements have become more burdensome and the punishments for failing to comply more severe.Yet with the testing apparatus growing bigger and bigger, the resources to support it have come under more financial strain, and the government, which funds most of the testing, has shown signs that it is struggling to pay up.

The mass testing strategy in China — which has yet to approve an mRNA vaccine — began in May with an order for cities with more than 10 million people to do regular testing and provide testing facilities within a 15-minute walk of anywhere in the city. Overnight, tens of thousands of testing booths popped up in cities like Shanghai and Beijing.

Blythe Dai said she gets tested for the coronavirus as frequently as possible. Her grandmother was recently dying in the hospital, but Ms. Dai wasn’t allowed to see her because her ‌48-hour negative P.C.R. test had expired.

“Covid is not so scary,” said Ms. Dai, a 30-year-old resident in Shanghai. Instead, she said, it is the emotional cost that she and others have to pay. “We have sacrificed too much to control the epidemic,” she said.

For smaller local governments already under pressure to stimulate a slowing economy, building a testing network as large of those found in Shanghai and Beijing has created a huge financial strain.

Local authorities in provinces such as Shanxi and Jiangxi have already diverted money from public projects in order to fund pandemic monitoring and control. In some cities, civil servants have faced pay cuts. In others, bonuses for officials have been frozen to help prop up testing.

And yet there are signs from some of China’s biggest testing companies that there is a cash shortfall.

Dian Diagnostics said this summer that the amount of money it was still owed in payments had nearly doubled over the past year and warned of the “risk of bad debts.” Shanghai Runda Medical Technology recently said unpaid bills had increased by a quarter over the same period. Guangzhou Kingmed Diagnostics warned that delays in payments could raise its risk profile.

“There is a serious imbalance between local government revenue and expenditure,” analysts at the Bank of China Research Institute wrote in a note to clients in late September. They estimated that regular mass testing would cost nearly $100 billion a year if 900 million people were tested every three days.

Cases continue to rise as these financial pressures mount. Last week, a top official in the Xinjiang region, Liu Sushe, made a rare admission of defeat when he said, “We have not been able to achieve dynamic zero Covid for more than two months,” citing the “ineffectiveness of our control measures.”

While the testing measures are proving to be less effective, the industry continues to make huge profits. Bigger companies like Dian Diagnostics have reported revenues that more than doubled over the first six months of this year, said Jialin Zhang, head of China health care research at the Japanese bank Nomura.

For Chinese citizens like Chen Yaya, these riches have come to symbolize the futility of Beijing’s zero-Covid policy.

Ms. Chen, a Shanghai resident, said she was quietly protesting the city’s testing requirements by refusing to get swabbed more than once a week, as required. She organizes her schedule so that she does her grocery shopping and sees friends within the first 72 hours after her weekly test. By limiting the number of tests she gets, she’s hoping to avoid lining the pockets of testing companies and her chances of being swept into a lockdown.

“Reducing the profits of testing companies is only a superficial reason” to avoid testing, Ms. Chen said. She is mostly concerned that she will be caught in a lockdown or sent to a government isolation facility if she tests positive. “That’s why I try to do as little as possible.”

To force people to submit to the swab, the authorities have reached for more punitive measures. In the south, north and east of China, the police have detained people for days for skipping P.C.R. tests, sometimes locking them up for more than a week.

There was a time when China’s ability to find and isolate cases was considered the crown jewel of its pandemic strategy. While countries around the world saw infections soar and hospitals reach capacity, China’s Covid numbers remained low, allowing officials in Beijing to relish in their success handling the virus while Chinese consumers kept the economy humming.

But the new, near-daily testing regime meant to combat stubborn variants is being met with growing frustration as the true costs of sustaining such a program become more clear. For gig workers who get paid only by the order, for example, waiting in line for a test can mean lost wages.

For people like Haily Zhao, who gets swabbed every 72 hours as required by the authorities in Beijing, testing cuts into the time she needs to decompress after work. “It’s not, ‘I can do whatever I want as long as I’m doing P.C.R. testing,’” said Ms. Zhao, 26. “It’s, ‘Whatever I’m doing or want to do, I have to do a P.C.R. test first.’”

When one conference recently used the tagline “The age of P.C.R. prosperity” in its marketing material, the backlash was so swift that the organizers had to cancel the event and later clarified it was not meant to promote P.C.R. testing. “Some people are rubbing salt in the wounds of those who are suffering,” one commenter wrote of the conference online.

Even some of the workers who swab throats and noses and process test results have lost enthusiasm for the country’s testing protocols. Before China’s mass testing mandate, there were 153,000 people employed as testers and hundreds of thousands of Communist Party member volunteers ready to help fight the coronavirus.

But the job is tiring and pays little. While a lab technician can make as much as $4,250 a month, advertisements for swabbing jobs offer something closer to $1,000.

“It’s a boring, tedious, repetitive, mechanical job,” said Hu Shixin, a college student in the eastern city of Nanjing. Mr. Hu volunteered for two weeks in August to help with testing in the industrial city of Taiyuan as part of a youth Communist Party program. Dressed in a sweaty protective suit, he scanned ID cards and handed out the P.C.R. testing tubes.

Other community and medical workers sometimes cut corners and pretended to test people without taking samples, Mr. Hu said. “Maybe they don’t think that doing the P.C.R. test is so necessary,” he added. “For them, doing P.C.R. testing is just a job.