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Private companies are cashing in on China’s new COVID reality: mandatory PCR tests—indefinitely

May 31, 2022, 1:01 PM UTC

Chinese authorities are pushing to reopen Beijing and Shanghai this week with hopes that a return to normalcy in the country’s political and financial hubs, respectively, could jump-start an economy suffering from months of COVID lockdowns. But as residents across China emerge from their apartments—some after months of confinement—they will confront a seemingly permanent fixture of daily life: polymerase chain reaction (PCR) COVID testing booths.

In central Henan province, officials launched a scheme that will force the province’s 99 million residents to take a government-organized PCR test every other day indefinitely starting in June. China’s Vice Premier Sun Chunlan, the government’s top COVID official, announced plans earlier this month for major cities to open a COVID testing booth within a 15-minute walk of every resident. In Beijing and Shanghai, residents need to present a negative PCR test within 72 and 48 hours, respectively, to ride the subway or enter a public venue.

Stubborn Omicron-fueled outbreaks have forced China to double down on its COVID-zero strategy that seeks to eliminate every virus case, says Xi Chen, associate professor of public health at Yale University. “More frequent testing has become the new normal to keep up with fast and silent transmission,” he says. Chen projects China, the world’s last COVID-zero holdout, will mandate regular PCR tests until 2023.

China’s ongoing reliance on PCR tests is big business. Nomura estimates that China’s COVID testing industry could equal 1.8% of the country’s annual GDP, equivalent to $319 billion. Chinese brokerage Soochow Securities’ estimate is a tick lower, calculating that testing could cost China 1.5% of its annual GDP or $254 billion. Private testing companies—some of which have already been accused of malfeasance—are making a killing. Yet experts say China’s commitment to PCR tests is financially burdensome and unsustainable—and will detract from longer-term solutions that could help the mainland finally emerge from its yearslong cycle of mass lockdowns and isolation on the global stage.

PCR boom

Wuhan first pioneered the mass-testing strategy in June 2020, when authorities tested 10 million residents in just over two weeks to help the city emerge from months of lockdowns. “They realized they had the capacity to test a large number of cases in a very short period of time,” says Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations. “Mass PCR testing became a key component of China’s zero-COVID strategy.”

Mass testing, contact tracing, and lockdowns helped China essentially eradicate COVID from its borders for nearly two years, allowing people to return to the office, eat at restaurants, and attend concerts even before China rolled out vaccines in the spring of 2021. In the first two years of the pandemic, China’s COVID-zero policy caused only minor economic hiccups; the country’s economy bounced back from COVID more quickly than its Western peers.

Then came Omicron.

Earlier this year, months of lockdowns in Shanghai and dozens of rounds of citywide PCR tests were slow to contain a fast-spreading outbreak of the highly transmissible COVID variant. In fact, in some instances, PCR testing facilities were blamed for facilitating the spread of the virus. Still, China’s government remained committed to regular PCR testing.

Most other countries now favor rapid antigen tests (RATs) over PCRs because they can be taken at home and produce faster results than PCRs. But China has remained committed to PCRs because authorities do not trust citizens to accurately report their own results, says Huang.

“[China’s government] knows that if they allow people to [RAT] test at home, they are going to completely lose control…They want to centralize the data,” says Huang.

Local governments are now struggling to figure out how to pay for the billions of tests they must administer indefinitely.

Some private companies, meanwhile, are reaping the rewards.

There are over 3,000 companies across China receiving money from government contracts for PCR tests, according to Reuters. The beneficiaries vary based on province and city, as local municipalities enlist their own networks of manufacturers and suppliers to obtain their own PCR supplies. In Shanghai, Runda Medical Technology Co. earned $30 million per month for supplying COVID tests to the Shanghai government during the city’s two-month lockdown, Chinese state media reports. Hangzhou’s Dian Diagnostics has also raked in hundreds of millions of dollars in additional revenues in recent months as a result of China’s PCR boom, according to its recent financial statement.

Fraud?

Beijing, meanwhile, says it is attempting to rein in the power of the booming private PCR industry.

In recent weeks, Beijing police have detained dozens of employees from three PCR laboratories in the city, including eight people from Zhongtong Lanbo, 17 from Jinzhun Medical, and six from Pushi Laboratory for alleged fraud. The companies did not immediately respond to requests for comment.

Police say the three PCR labs have been forging test results and manipulating data to maximize their profits. PCR laboratories in China can combine up to 10 samples together when screening for COVID in order to speed up testing times. The “batching” method is effective and far more efficient than individually testing each sample, but China’s regulations limit batches to 10 per sample so as not to dilute the results.

Police are now accusing the PCR testers of missing positive cases by batching 20, 30, or even more COVID test samples together in a single screen.

“[This] illegal activity might increase the risk of spreading the pandemic…We have zero tolerance for that behavior and will severely punish it according to law,” Beijing police said in a statement on Sunday.

Such a one-off crackdown on bad actors may deflect attention away from Beijing’s decision to prop up an unsustainable industry with diminishing public health utility, says Chen, citing the potential for false negatives, the cost to local governments, and the need to divert resources and manpower away from hospitals to testing sites. The proliferation of tests is also contributing to mountains of medical waste. “It is not effective to rely on PCR testing for zero-COVID,” Chen said.

Chen said the rise of the “PCR industrial complex” also may distract from what should be China’s most pressing public health goal: boosting the country’s COVID vaccination rate, especially among elderly and vulnerable populations. As of mid-March, the last time China’s government released such data, just 51% of China’s population over the age of 80 was fully vaccinated.

“The ever-increasing power of the PCR industry could block all efforts that strive for a more sustainable strategy against COVID-19 such as vaccinating vulnerable populations,” says Chen.

Earlier this month, Goldman Sachs downgraded its 2021 GDP forecast for China from 4.5% growth to 4%, citing the potential $370 billion cost of frequent PCR tests. Still, China’s government does not appear willing to deviate from its commitment to regular mass PCR testing despite the policy’s ineffectiveness and economic toll.

“PCR testing is becoming routinized and institutionalized…It’s here to stay,” says Huang.

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