China’s zero-Covid era is over, and as the virus spreads across the country, all eyes are on how the country’s healthcare infrastructure will cope. 

While scientists say cases in major cities, such as Beijing and Shanghai, have likely peaked, there is concern that the arrival of the Lunar New Year holiday, which begins on January 21, will deliver a fresh wave of infections from cities to rural areas, as hundreds of millions of migrant workers make the annual pilgrimage back home. 

Three years of stringent Covid-control measures should have given the Chinese authorities ample time to prepare for the onset of the virus. But official data on China’s healthcare spending shows it actually decreased between 2020 and 2021, and that growth in hospital infrastructure has slowed.

This week, The Wire looks at the state of China’s healthcare system.

THE COST OF ZERO

Municipalities across China came under intense financial pressure last year because of the rising cost of maintaining the zero-Covid policy. Local governments have been largely responsible for the immense cost of regularly mass testing residents for the virus, just as many city governments are grappling with revenue shortfalls due to China’s real estate crisis.¹In China, cities raise a significant amount of revenue by selling land to developers. A depressed property market has meant declining revenue for municipalities from land auctions. Toward the end of last year, shortly before China relaxed its virus controls, a growing number of municipalities began requiring residents to pay for their own tests.

Meanwhile, private Chinese testing providers, contracted by local governments, recorded blockbuster revenues in the first nine months of 2022. But their accounts receivable — money owed to the companies that they have not yet received — also shot up, a possible sign that municipalities, some of their biggest customers, have been struggling to pay their bills. In October, BGI Genomics, a testing provider, reported a 55 percent year-on-year increase in credit impairment losses, mainly due to unpaid bills.

HOSPITAL SLUMP

Although China’s healthcare infrastructure has steadily expanded for decades, in the last five years, the rate at which new hospitals have been built has slowed significantly. Official statistics show that the number of hospitals nationwide grew on average 5.7 percent year-on-year from 2011 to 2019. By comparison, from 2020 to 2021, the growth rate dropped to 3.3 percent. 

General hospitals in particular have been hit hard by the slowdown, with their growth falling from on average 5.2 percent year-on-year between 2011 and 2019 to just 0.9 percent in 2021. 

It’s hard to deduce how the pandemic has affected infrastructure investment from the number of new hospitals alone, as capital projects take time to come online. A more telling statistic is that overall government healthcare spending decreased by 6 percent between 2020 and 2021, after seeing an uptick in the first year of the pandemic. 

Meanwhile, social healthcare spending — expenditure by all sectors excluding direct government spending, such as commercial healthcare insurance — and out-of-pocket spending on items like non-prescription drugs has risen over the last five years.

OVERSEAS COMPARISON

Figures comparing China’s healthcare infrastructure and spending to other countries provide mixed clues about the country’s capacity to respond to Covid’s spread. China’s overall number of hospital beds per thousand people is high, at 6.7, compared to the OECD average of 5. 

Still, China’s healthcare spending as a share of GDP is comparatively low, and lags behind the OECD average. Additionally, experts point out that details such as the distribution of hospitals are also important considerations.

DRUG DISAGREEMENTS

As Covid spread through China’s major cities in December, residents clamored to buy up supplies of Paxlovid, the anti-viral treatment for Covid developed by Pfizer. While the drug is widely available in the U.S., supplies in China are limited.

Negotiations between Chinese health officials and U.S. producers of Covid drugs are deadlocked, in part because drug makers believe China isn’t offering to pay enough. 

“They are the second highest economy in the world. I don’t think that they should pay less than El Salvador, which is a poor country,” said Pfizer CEO Albert Bourla in a conference call with the JP Morgan Healthcare Conference earlier this week.

China’s National Healthcare Security Administration has thus far excluded Paxlovid from the national drug reimbursement list, citing the cost: Inclusion on the list would allow citizens to be reimbursed under the national insurance scheme. Two Chinese-made Covid drugs have been included on this list, namely Azvudine and Qingfei Paidu granules, although scientists say that evidence of the latter’s effectiveness in treating Covid remains inconclusive.

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