SinoInsight 1
May 11
Photos of government workers laying out red and purple-colored flowers along a major Shanghai thoroughfare (Yan’an Road) were circulated on Chinese social media. The photos came with the following caption: “Best news from Shanghai. Flowers are being arranged and lawns are being trimmed along Yan’an Road. At a glance, it seems like some important person is personally coming to Shanghai to declare victory over the epidemic. These kinds of flowers can live for about a week. Jiayou, there will definitely be a party before the 20th.”
May 13
Wu Qing, the executive vice mayor of Shanghai, said in a press briefing that the city is looking to achieve its “societal zero-COVID” target by May 20.
“The outbreak is stabilizing and the situation is improving although some small fluctuations [of new cases] are seen. After all, more than 99 percent of new infections were detected in quarantine areas, which have already been sealed off,” Wu said.
According to official data released on May 13, Shanghai saw 2,096 new infections over 24 hours, a 44.7 percent increase from the previous day. Over 600,000 people in Shanghai’s 25 million population have been infected since March 1.
May 15
Shanghai deputy mayor Chen Tong announced that shopping malls, department stores, and supermarkets will resume in-store operations and allow shoppers “in an orderly way” starting May 16. Hair salons and vegetable markets would reopen with limited capacity.
Chen said that Shanghai’s approach to the epidemic was entering a new transition “from emergency response to normalized prevention and control.” The Shanghai authorities reported 166 new cases and 1,203 asymptomatic cases over 24 hours.
OUR TAKE
The above developments indicate that the Shanghai authorities and the central government are laying the groundwork to end lockdowns in Shanghai and declare “victory” of “zero-COVID” in defeating the coronavirus even if there are still cases. Shanghai Party secretary Li Qiang’s recent “military pledge” and implementation of more severe “dynamic zero-COVID” measures are likely preparation work for the local government to later announce that it has “technically” achieved “societal zero-COVID” and promote the notion that the “Greater Shanghai Defense Battle” has been won.
As we analyzed on April 18, “The Shanghai government and Beijing could even gradually move towards declaring ‘victory’ over the virus and the success of ‘zero-COVID’ in propaganda and official numbers even if it does not reflect the situation on the ground.”
We also wrote on May 9 that Xi “has to promote and defend [‘zero-COVID’] at all costs, even if it means rolling out heavy-handed, ‘cult of personality’-type propaganda, as well as publicizing nonstop the ‘rational,’ ‘beneficial,’ and ‘scientific’ nature of ‘zero-COVID.’ To ensure that the policy ‘works,’ the Xi leadership will find ways to tweak how ‘zero-COVID’ is defined and falsify data to pave the way to declare ‘victory’ closer to the 20th Party Congress.”
The Shanghai authorities and Beijing are likely being compelled to declare “victory” in the “battle to defend Shanghai” and extol the “success” of “zero-COVID” sooner rather than later because the Xi leadership is facing tremendous internal and external pressures over its draconian epidemic prevention measures. Lifting lockdowns in Shanghai is vital to rescuing the economy, appeasing an increasingly angry local populace, and stabilizing society in general. “Spinning tragedy into victory” in Shanghai also helps the Xi leadership push back against mounting opposition voices inside the Party, cover up the failures of the Xi camp, and better usher in the “victorious opening of the 20th Party Congress.”
If Shanghai is indeed looking to make a “victory” declaration on May 20, it is possible that Xi Jinping could visit the city to show support for his political ally Li Qiang and “resolutely oppose all distortions, doubts and denials” stemming from factional rivals. Other members of the Politburo Standing Committee like Li Keqiang could also be tasked to inspect Shanghai.
SinoInsight 2
On May 9, PRC vice premier Sun Chunlan proposed improving epidemic response and handling capabilities, including establishing nucleic acid “sampling circles” within a 15 minutes’ walk in large cities, planning to construct more makeshift hospitals, and “normalizing nucleic acid testing” (常態化核酸檢測) as a means of early detection.
Sun’s proposals have since been rolled out in many cities. Mainland media outlets have also begun analyzing and reporting on the impact of the “normalized nucleic acid testing” policy on China’s economy, finance, epidemic prevention infrastructure, and employment.
‘Normalized nucleic acid testing’ policy
From May 12, the Beijing municipal government required residents to produce a 48-hour nucleic acid test certificate when entering public places like work units, commercial buildings, supermarkets, and hotels. According to public reports, at least 17 cities (including Beijing) have issued a similar policy, impacting an estimated 200 million people, or 17 percent of the Chinese population.
Economic costs of ‘normalized nucleic acid testing’
1. Soochow Securities found the economic costs of lockdowns and “normalized nucleic acid testing” to be “very staggering.”
In the case of lockdowns in Shanghai, the city was estimated to lose 156.8 billion yuan if a partial lockdown is imposed for 14 days a month. Soochow Securities also estimated that Shanghai would lose 20 percent of its annual GDP (Shanghai’s annual GDP is 4.32 trillion yuan) if it underwent a partial lockdown every month, with losses in April reaching a high of 40 percent of Shanghai’s annual GDP. Soochow Securities further estimated that large cities, including national-level centers, major industrial towns, and provincial capitals, stand to lose 32 percent of their monthly GDP after a two-week lockdown.
As for nucleic acid testing, China’s 123 cities in 29 provinces (total population of 180 million) are estimated to have spent 21.6 billion yuan on testing as of April 30 due to the recent round of outbreaks. If all first- and second-tier cities in China implement “normalized nucleic acid testing” in the most extreme case, those cities are expected to spend 143.6 billion yuan on testing per month and 1.7 trillion yuan per year, according to Soochow Securities. This is equivalent to 1.5 percent of China’s 2021 GDP and 8.7 percent of public revenue that year. However, no city in China has a general public budget revenue of over 1 trillion yuan, with only 17 cities taking in more than 100 billion yuan.
2. Mainland media outlets published reports on nucleic acid testing fees, shortage of testers, and testing infrastructure.
Fees
According to media reports, the Beijing municipal government had announced that nucleic acid testing would be free for residents, and the testing fees would be jointly borne by financial funds and medical insurance funds. Later, other areas like the cities of Taiyuan, Hefei, Wuhan, Fuzhou, and Xiamen announced free testing for local residents, while Kunming City offered free testing f0r residents until May 15.
Testers
The Shanghai stock exchange’s industry weekly report on May 9 noted that at least 750,000 new testing points will likely be added nationwide in considering the size of China’s urban population. Those testing points would have to hire at least one million testers to handle the work. Meanwhile, the private think-tank Wisdom Valley Trend (智谷趨勢) estimated that China’s first- and second-tier cities would need about 1.4 million nucleic acid testers.
Mainland media outlets noted the difficulties in hiring nucleic acid testers. National Business Daily wrote that there are specific work requirements and procedures for testers, including training, collection procedures, collection methods, and personnel protection, citing the eighth edition of the PRC National Health Commission’s epidemic prevention and control plan.
Yicai Global found that qualified testers were being recruited this year with favorable salaries and insurance plans in various areas, citing data from local health commissions and social service companies. For instance, a city health management company in the Yangtze River Delta was offering “nucleic acid testing and sampling nurses” remuneration of 400-600 yuan per day and 70-100 yuan per hour during a lockdown period. The testers are required to have a nursing certificate, with experience in blood collection and nucleic acid sampling preferred. Meanwhile, a medical investment management company in Shanghai was offering qualified “nucleic acid testing and sampling nurses” a salary of 1,000 yuan per day, as well as year-end bonuses, regular physical examinations, free accommodations, the so-called “five insurances and one housing” (五險一金) social security package, and employee travel and stock options.
Nucleic acid testing infrastructure
According to mainland media reports, Wuxi City in Jiangsu Province opened 2,634 nucleic acid sampling huts over the Labor Day holiday in early May. Wuxi City also issued nucleic acid sampling hut management specifications (新型冠狀病毒核酸採樣小屋管理規範), which regulate the location of huts, their basic facilities, staffing, personnel protection, specimen collection and transportation, medical waste disposal, and abnormal situation disposal.
Private think-tank Wisdom Valley Trend used Wuxi City’s nucleic acid testing sampling points as a reference in estimating that the construction of one such point on the mainland could cost between 10,000 yuan and 45,000 yuan depending on the configuration.
Analysis: Assuming an average cost of 22,500 yuan (median of 10,000 yuan and 45,000 yuan) per sampling point and the need to construct at least 750,000 sampling points to handle “normalized nucleic acid testing,” then the PRC could end up spending 16.875 billion yuan on testing infrastructure.
OUR TAKE
1. The PRC appears to be rolling out “normalized nucleic acid testing” as a way to allow officials and residents to “flexibly” adhere to Xi Jinping’s “dynamic zero-COVID” policy while minimizing damage to the economy from lockdowns.
There are several likely considerations behind the CCP’s new “flexibility” in implementing “zero-COVID”:
- Beijing needs local governments to cut down on lockdowns to restore economic activity and production levels.
- Mass nucleic acid testing during lockdowns is difficult to organize, very disruptive to society, creates conditions conducive for viral transmission, and serves as an impediment to achieving “zero-COVID.”
- Mass nucleic acid testing makes it harder for results to be released in a timely fashion, affecting individuals and “zero-COVID” work. Also, testing companies are known to produce fraudulent results (either because they lack the capacity or under pressure from local governments), thereby reducing the effectiveness of epidemic prevention measures and increasing the risk of transmission. The CCP could also be looking to address the prevalent problem of “false positives” and growing public grievances as people get wrongly sent to quarantine.
- Requiring only those who need to enter public places to produce a 48-hour test can prevent local governments from applying “one-size-fits-all” approaches to nucleic acid testing. For instance, local governments have been known to force home-based residents or elderly with mobility problems to leave their residences for testing, which greatly inconveniences them and increases their risk of infection. Putting the onus of testing on the individual also allows local governments to save time and money on detection work.
- The CCP can use “normalized nucleic acid testing” as a way to obliquely carry out “stability maintenance” work. For instance, dissidents, human rights lawyers, or those blackmarked by the CCP authorities will find their movements further restricted when they are issued “positive” nucleic acid tests, are “mysteriously” denied tests, or find that their results never get back in time when they are needed. Thus, rights defense lawyers could find themselves unable to show up in court to defend clients because they lack a 48-hour negative test, and dissidents could find themselves “vanished” into quarantine when their test shows up “positive” even though they may be symptom-free.
- The CCP’s huge investment in testing infrastructure suggests that it believes that “zero-COVID” will be on the books for some time, or Beijing is planning to quietly make the transition to “living with the virus,” or both.
2. On paper, “normalized nucleic acid testing” seems like a solution to balance out the excesses of “zero-COVID” and put China on the path of economic recovery. However, the PRC’s dysfunctional officialdom and serious shortcomings inherent to the CCP system mean that the policy tweak will still bring losses to the economy, society, and the Chinese people, to the detriment of the CCP regime.
As we have noted on numerous occasions, Party culture and bureaucratism have sabotaged many of Beijing’s policies. Officials keen on appearing “politically correct” will adopt a “campaign-style” approach to implementing “normalized nucleic acid testing” without considering the practical problems associated with the policy (financial consumption, economic costs, manpower and resources, long-term feasibility, etc.).
For instance, economically affluent regions will provide free testing because they can afford it in the short-term by tapping into local finances or seeking central government subsidies. The local governments of more affluent regions, however, will find that they have less to spend to stimulate the economy, make investments, and maintain regular operations in the long run. Meanwhile, local governments of impoverished areas could attempt to turn “normalized nucleic acid testing” into a money-making business by charging for testing and fleecing local residents. Local residents of areas that charge fees would be far less willing to travel and spend to avoid paying testing fees where possible, further inhibiting the already sluggish economic activity.
Local governments could also exploit “normalized nucleic acid testing” to create administrative monopolies and opportunities for corruption. For instance, the Beijing Chaoyang District Center for Disease Control and Prevention announced on April 25 that some areas of the district would see enhanced epidemic control measures, and residents were forbidden from leaving those areas. The next day, Beijing Chaoan Medical Laboratory Co. Ltd. was established to undertake large-scale nucleic acid detection work, a development that opens the door for administrative monopolies to be formed and corruption to take place.
Xi camp adviser Huang Wansheng had earlier noted in a leaked recording that “massive interest groups” in the pharmaceutical business and government had been taking advantage of the pandemic to scoop up billions. Huang gave the example of how certain companies tasked with conducting nucleic acid testing made 670 billion yuan after local governments ordered compulsory mass testing when just “one or two” positive cases were discovered. When left to their own devices, local governments and testing companies will almost certainly find loopholes in “normalized nucleic acid testing” to profit off the policy. Ultimately, the Chinese people will continue to suffer and be made to “pick up the tab” (both literally and figuratively) for “normalized nucleic acid testing,” and the CCP’s political legitimacy will further erode as a result.
