According to this DW report in Chinese, Reuters analyzed the Chinese government spending on COVID policy, just this year alone, totalling to around 350 billion Yuan (around 53 billion USD). This includes testing, infrastructure, monitoring, etc. Testing alone is about 15 billion USD. Most of the testing is done by Independent Clinical Labs (ICLs).
Independent Clinical Labs are a relatively new industry in China. Although the first ICL, Guangzhou Kingmed, started in 1994 in China, it took off in 2015 with government policy changes on healthcare. To cut cost in hospital services to reduce spending of public healthcare, ICLs were encouraged by the government. The industry grew so fast that in 2019, the industry was in steep competition. Meanwhile, half of the market was monopolized by a few big companies. License was hard to get, and market access was scarce. According to an in-depth news report in Jan 2022, in 2018, a licensed lab was priced at 10 million Yuan and it was hard to get one. In 2019, the price dropped to 4 million Yuan and no one was interested.
Then COVID happened. Zero COVID policy was implemented. PCR test became in high demand.
For example, according to the same news report, Kingmed is the country first and leading ICL company; their sales from 2017 to 2020 were: 3.8, 4.5, 5.3 and 8.2 billion Yuan, while their net profit was 200, 255, 415 and 1500 million Yuan respectively. In 2020, the sales increased by 56.5% and the net profit increased by 279%.
Existing ICLs saw their declining business turned around in 2020 and record profits were made. At the same time, new ICLs were created just to meet the demand for PCR testings. For example, in the report, there were only 98 companies that can do PCR test in Beijing in early 2020, now there are 2000 companies.
With profit rising, investment poured in. Competition became steep again and profit margin started to decline. Meanwhile, the industry also noticed that the testing logistics needs strong management to ensure quality results. Because many companies rushed in for quick money, the quality is hard to be guaranteed.
Before the criminal investigation started, there have been many complains about the inaccuracy of the testing results. But no one in the government cared about it. One’s life can be easily upended if tested positive by prolonged quarantine outside one’s home. Many citizens resisted but most just followed the orders without asking any question. The universal testing of cities of millions of people became more and more routine. That must be a huge amount of money, who is paying for it?
On May 25th, according to the Chinese media, China’s National Healthcare Security Administration has released a document to all local governments, stating that the healthcare fund can not be used to pay for large scale COVID testing, and directed all local governments to change their current courses. This statement came as some local governments had used up their resources on testing and had written letters to the National Healthcare Security Administration for support. Allegedly, some local governments already used the fund. Until then, no one actually knows who is paying for the testing.
This statement has triggered many local governments to think twice before they order mass testing, because many local governments have severe fiscal problems. Some social media users in Beijing claimed that after the announcement, the testing station in their neighbourhood disappeared, even though they used to be forced to have one test a day before. Some people outside Beijing said that testing is no longer free in their neighbourhood.
You might ask, why now? Didn’t they do this kind of massive testing last year already?
Yes, but the way business transactions go in China, the companies have to wait for half a year or a year to get paid by the customers, the government in this case. Which means, now, many testing companies are waiting to be paid. A social media article explained the difficulty many small/median sized testing companies are facing: the company had to borrow money to keep the company running, but they are at the last straw if the government could not pay them right now.
What happens if the company can not pay their employees? Well, some employee might report mal-practice to the government, and hence the criminal investigations. This is one speculation. Other people have long suspected that the testing companies have incentives to give false positive results and hence prolong the need to test. With local governments themselves deep in debt to the companies, how convenient it is to charge the ICLs with criminal activities. On top of that, the governments can now refuse to pay them. Again, how convenient!
Already, 3 testing companies in Shanghai and 3 in Beijing are reported to be under police investigation, with the key company executives in police custody.
It is perhaps best summarized by the Washington Post op-ed: How the U.N. became a tool of China’s genocide denial propaganda.