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By Laura He, CNN Business
China’s Covid 0 strategy of endless lockdowns has hit its economy and weighed on corporate profits, yet it has provided a boon for check makers.
Twelve of China’s major Covid corporations recently recorded massive increases in profits and net profits during the first part of this year.
Andon Health, which supplies Covid verification kits both locally and overseas, said its net profit soared 27. 728% in the first six months of 2022, reaching 15. 24 billion yuan ($2. 2 billion). This is the largest accumulation recorded through an indexed company in mainland China. .
Meanwhile, its revenue increased by 3,989%.
The company benefits only from China’s competitive testing crusade on its territory, but also from mass demand in the United States, as its iHealth lab recently won contracts with the U. S. government. U. S. for the source of immediate antigen testing.
Assure Tech, a Hangzhou-based diagnostics company, also recorded a 1324% increase in net profit due to strong demand in the global Covid market.
Other checkbooks recorded profit increases of 55% and 376% during the first six months of the year.
Endless Covid testing, two-way government-imposed lockdowns, and border restrictions have wreaked havoc on the Chinese economy. GDP grew by 0. 4% in the current quarter, the slowest speed in more than two years. Major investment banks have cut their total annual expansion forecasts for China to 3% or less, well below the official 5. 5% target set by the government earlier this year.
Chinese corporations also suffered one of their worst earnings recessions on record. More than a portion of the 4,800 indexed corporations in Shanghai, Shenzhen and Beijing saw a drop in profits in the first part of the year, almost as bad as in early 2020, when peak corporations posted their worst earnings season.
But diagnostic corporations are one of the pandemic’s biggest cash resources, benefiting from the massive call for testing as Beijing sticks to its 0 Covid policy consisting of forced quarantines, mandatory mass testing, and instant lockdowns.
Since the beginning of the pandemic through April 2022, 11. 5 billion tests have been conducted in China, according to the government.
That figure may have especially risen since then, as analysts at Soochow Securities recently estimated that 10. 8 billion tests were conducted in the three months from April to June.
Prices may weigh heavily on the Chinese government’s finances, which have already suffered from the collapse of asset sales. In May, Beijing officials made it clear that provincial and municipal governments will have to pay the prices of normal covid testing.
Assuming that major Chinese cities that make up 30 percent of the population test for covid twice a week, the direct burden of testing could be just two hundred billion yuan ($30. 1 billion) from May to the end of the year, according to one estimate. through Goldman Sachs earlier this year.
The number may increase if the remaining 70 percent of the population is controlled and the costs of setting up control sites and quarantine centers are taken into account, Goldman Sachs said.
El-CNN-Wire™
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