As more and more Chinese cities implement regular coronavirus testing, there are indications that a nationwide roll-out of mass testing in all first- and second-tier cities could cost China 1.5 per cent of its entire 2021 gross domestic product this year.
Municipal authorities in the northeastern port city of Dalian, in Liaoning province, announced on Tuesday that full-scale testing will be conducted every week, starting from Thursday.
And the central logistics hub of Zhengzhou, in Henan province, also said on Tuesday that it would be carrying out three rounds of testing in downtown areas until Friday.
They join a growing list of local municipalities that have pushed for more frequent testing in the face of resurgent domestic outbreaks, following similar moves in the capital Beijing, as well as in the southern manufacturing and technology heartland of Shenzhen and the eastern city of Hangzhou.
The practice of regular mass testing is likely to be vastly extended across the country after the five-day Labour Day holiday that ends on Wednesday, in an effort to better coordinate virus-control efforts, per Beijing’s instructions, according to Tao Chuan, chief macro analyst at Soochow Securities.
If all of China’s first- and second-tier cities, with roughly 505 million residents, implement a year’s worth of mass testing, the cost could top 1.7 trillion yuan (US$257 billion), which would be about 1.5 per cent of China’s 2021 GDP, or about 8.7 per cent of last year’s public fiscal revenue, Tao said.
And he warned that the additional cost will put further pressure on local authorities and municipal coffers, which are already being strained due to the implementation of tax cuts and increased infrastructure spending to boost China’s slowing economy.
“A cost of more than 100 billion yuan per month in [coronavirus] test procurements is not a small expense,” he said. “Apart from letting residents bear part of the cost, issuing special treasury bonds is also an important and feasible option” to offset the expense.
Beijing is steadfastly sticking to its so-called dynamic zero-Covid policy as it looks to combat the country’s worst wave of infections since Wuhan in 2020, driven by the highly transmissible Omicron variant.
However, economists continue to warn that the draconian measures are standing in the way of Beijing’s ambitious GDP growth target of “around 5.5 per cent” for 2022. And some high-profile experts who have publicly voiced concerns found themselves silenced and censored online shortly thereafter, with no indication of what red line they may have crossed.
Fitch Ratings on Tuesday slashed its estimate for China’s 2022 economic growth from 4.8 to 4.3 per cent, expecting that the country will adhere to its “dynamic zero” strategy until 2023.
In a quarterly meeting on Friday, the Politburo, the Communist Party’s primary decision-making body, said China would stick with the dynamic zero-Covid policy.
But the leadership also underscored that containment efforts should be “in accordance with new characteristics in virus variation and transmission” to “minimise the impact of the outbreaks on economic and social development”.
Although it might not be the best solution for China, regular mass testing is still a less-costly option than lockdowns, Tao said.
He estimated that the monthly losses could reach 156.8 billion yuan if the nation’s biggest cities, such as Shanghai, are locked down for two weeks while partial lockdowns are adopted in regions that make up a combined 20 per cent of China’s GDP.
That figure is compared with Tao’s estimated monthly cost of 143.6 billion yuan – totalling 1.7 trillion yuan over 12 months – for regular mass testing. However, citywide lockdowns tend to entail large-scale testing, so the economic toll is compounded.
At least in terms of cost, regular mass testing may be a better option than targeted, high-intensity lockdowns
“At least in terms of cost, regular mass testing may be a better option than targeted, high-intensity lockdowns,” Tao said.
Analysts from Founder Securities also said in a note on Tuesday that “testing has exploded under the dynamic zero-Covid policy”, especially this year.
“Testing has become a daily necessity for people to go out,” they wrote.
By mid-April, China had about 13,100 coronavirus testing agencies and a daily testing capacity of 51.65 million samples, according to the National Health Committee.
A series of financial results last month showed that several major coronavirus-testing players in China registered huge year-on-year profits in the first quarter, ranging from 58 to 190 per cent.