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China’s mass testing programs strain city finances

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Under pressure from increasingly transmissible coronavirus variants, China’s ‘zero covid’ policy is increasingly relying on large-scale testing to avoid socially disruptive and economically disastrous lockdowns like the one enforced in Shanghai during the major part of this spring.

But the push for constant swabbing has its own high costs. Because coronavirus testing is centralized (no home testing) and is primarily publicly funded, the growing demand for items such as test kits and sample collection booths has strained the local government finances and created quality and corruption scandals from poorly regulated testing companies.

As problems mount, test providers are quickly becoming a lightning rod for regulator scrutiny and public discontent, once again raising questions about the sustainability of the Chinese government’s resolve to prevent any community spread of the disease. , even as most of the world learns to live with the virus.

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“It’s pretty obvious that local governments are facing increasing fiscal pressure, with declining revenues and rising expenses due to the recession,” said Zhao Dahai, executive director of Shanghai Jiao Tong University-Yale Joint Center. for Health Policy. “Regular testing will make the situation worse.”

The mass testing theory holds that authorities in localities deemed to be at risk of coronavirus outbreaks can avoid shutting down entire cities, like Shanghai was, by testing everyone every few days to quickly identify affected areas at lock.

By avoiding city-wide restrictions, mass testing is meant to be the cheapest and least unpopular option. Officials say the idea is to catch cases earlier and control the spread earlier. Done right, it would allow local governments to keep businesses open and daily life uninterrupted.

Yet many localities are struggling to pay for the necessary testing to be in place or to conduct the monitoring necessary for an industry that has grown massively in a short time.

Last week, six ministries jointly issued notices announcing the “rectification” of problematic coronavirus-related medical products and testing infrastructure. The announcement came after Beijing city authorities penalized 12 testing companies over price and quality issues. Executives from two companies have also been arrested on suspicion of illegal testing, in a move that has been widely interpreted as sending a signal to other companies to get their operations in order.

“I don’t think it’s just Beijing – quality issues must be more prevalent in third-party coronavirus testing,” Zhao said. “When you lower the standards, there will surely be more inaccuracies and quality and safety issues.”

The ability to provide free mass testing has been cited by officials as proof of the effectiveness of Chinese governance. In April, Li Jinming, deputy director of the National Center for Clinical Laboratories, told reporters that China was the only country in the world that could carry out tests on such a scale, adding that China had carried out 11.5 billion tests. since the start of the pandemic. .

And China is far from done expanding its testing infrastructure. Deputy Prime Minister Sun Chunlan, who is leading much of the day-to-day pandemic response, has urged cities facing outbreaks to ensure residents are never more than 15 minutes’ walk from a site of testing.

However, all of these sites cost money and many municipalities face significant budget shortfalls that could ultimately threaten their ability to fund social services and pay public sector salaries.

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Health officials initially relied on the $534 billion state medical insurance fund to cover coronavirus-related expenses, which should have been enough to cover testing costs. But the National Healthcare Security Administration later clarified that only those in hospital could claim testing fees, charging local governments with the vast majority of costs.

Chinese leaders have also signaled their hands are tied, with Premier Li Keqiang telling local governments last month on an emergency teleconference to ease fears over the economy that they should not rely on the Treasure to bail them out unless they face a major disaster.

This puts the local authorities in a bind. Growing local government debt is reaching dangerously high levels in many parts of the country, hitting 30 trillion yuan ($4.45 trillion) in 2021 for the first time, more than double 2016 levels.

The annual cost of regular coronavirus testing could reach $252 billion, or 1.5% of China’s nominal gross domestic product in 2021, if a 48-hour testing regime were adopted in the country’s 49 largest cities, according to an estimate by Soochow Securities. (Another, more conservative estimate from Soochow puts the cost at no less than $40 billion, assuming a needs-based approach is taken.)

In a sign of funding bottlenecks, some hospitals have faced late payments or incomplete payments for their tests. A public hospital director in Xian, Shaanxi province, who spoke on condition of anonymity, said in an interview that he had not received payment for mass testing this year and that last year’s fees had not been paid in full, with the government citing a tight budget. for public funding.

The Economic Observer newspaper also published an article last week questioning whether it was necessary for a province with very few cases to spend around $89 million to buy coronavirus testing booths, which cost around $7,000 each. . The part was then dismantled.

Tight funds have also led to corner cuts, with complaints about hastily built and poorly designed test booths and companies hiring underqualified employees.

Cao Heping, an economist at Peking University, said amid the lack of oversight, there are plenty of profits to be made and a high risk of corruption. The proliferation of accusations online about test-related corruption suggests to Cao that there remain serious public concerns about “undersupervised companies capitalizing on a public health crisis and unaccounted taxpayer dollars.”

Significantly, despite the recent surge in demand for testing, investors do not see testing companies as a sound investment, fearing that they are based on an unsustainable bubble created only by what could turn out to be a goal. short term policy.

Wang Haijiao, managing partner of the Shenzhen-based investment group GTJA, says he has not and will not invest in companies that only do coronavirus testing because their profitability is entirely based on pandemic policy. which could well change.

He pointed out that facilities are often idle, waiting for the next outbreak. “Investors unanimously agreed that the pandemic is ending soon, so we viewed all covid-related profits as one-time bargains and never rated these coronavirus testing companies,” he said. .

Li reported from Seoul and Shepherd reported from Taipei, Taiwan.

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Post expires at 4:44am on Saturday June 25th, 2022

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