According to Bloomberg on September 7, COVID testing providers say frequent nucleic acid tests are draining their funds as customers are taking longer to pay.
Hangzhou-based Dian Diagnostics Group is one of China’s largest providers of COVID tests. The group said they might have to write off some unpaid bills as bad debts.
These unpaid bills are rapidly growing as eight of the largest listed virus-testing companies announced a combined 14.1 billion yuan ($2 billion) increase in accounts receivable as of June 30.
According to Bloomberg calculations, these receivable accounts increased 73% from a year earlier.
Among these companies, Shanghai Labway Clinical Laboratory Co. saw the most significant jump of 189% in accounts receivable.
The delay in payments indicates the regime’s strict “zero policy” is leading to mounting costs of financial, economic, and social hardship.
China increasingly employs a combination of mass-testing and citywide lockdowns as cases crop up in every province.
Even in cities such as Beijing and Shanghai, which aren’t shut down, people must submit PCR tests every three days to use public facilities or go to work.
Local regimes are under pressure, as they are in charge of paying for mass testing. Shrinking business activities have caused a sharp drop in revenue, while COVID-related spending is increasing.
In addition to testing, this spending includes constructing quarantine centers and subsidies for heavy-hit business industries.
Mia He, a healthcare analyst at Bloomberg Intelligence, explained that one possible reason is that authorities underestimated the budget for massive testing and the unexpected lockdowns afterwards.
With the 20th National Congress of the Communist Party of China just around the corner, authorities are taking a more aggressive approach to curb the spread of the virus. As a result, the pressure on these companies may have intensified.
Bloomberg said Shanghai Labway shares are near their lowest levels since March. Dean Diagnostics shares have dropped 15% since their May peak. This week, Kingmed Diagnostics also closed at a more than two-year low.