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China's Covid Test Providers Are Owed Billions in Unpaid Bills
Risk of bad debts is rising as customers take longer to pay
Local governments face increase in health-care spending
Bloomberg News
September 7, 2022 at 6:54 p.m. EDTUpdated onSeptember 7, 2022 at 10:14 p.m. EDT
Testing is a core part of China’s strategy to contain Covid, but companies that provide such services are finding it harder to get paid on time.
Diagnostic firms say the testing blitz is draining their finances as customers take longer to pay their dues. There’s a growing risk some yet-to-be-paid bills will be written off as bad debt, said Hangzhou-based Dian Diagnostics Group Co., one of China’s largest Covid test providers.
The bill is rapidly growing. Eight of the largest listed virus-testing firms reported a combined 14.1 billion yuan ($2 billion) increase in accounts receivable as of June 30, or a gain of 73% from a year earlier, according to Bloomberg calculations. Among these companies, Shanghai Labway Clinical Laboratory Co. saw the biggest jump of 189%.
The delay in meeting payments underscores the mounting cost -- financially, economically and socially -- of President Xi Jinping’s strict approach to stopping the spread of omicron subvariants. 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, residents need to undertake PCR tests every three days in order to use public facilities or go to work.
Local governments -- which are responsible for covering the cost of mass-testing -- are facing a squeeze. Declining business activities are hurting fiscal revenue, while Covid-related spending is increasing. On top of testing, this expenditure includes the construction of quarantine centers and subsidies for heavy-hit business sectors. They are also targeting new drugs to limit serious illness...
China's Covid Test Providers Are Owed Billions in Unpaid Bills
Risk of bad debts is rising as customers take longer to pay
Local governments face increase in health-care spending
Bloomberg News
September 7, 2022 at 6:54 p.m. EDTUpdated onSeptember 7, 2022 at 10:14 p.m. EDT
Testing is a core part of China’s strategy to contain Covid, but companies that provide such services are finding it harder to get paid on time.
Diagnostic firms say the testing blitz is draining their finances as customers take longer to pay their dues. There’s a growing risk some yet-to-be-paid bills will be written off as bad debt, said Hangzhou-based Dian Diagnostics Group Co., one of China’s largest Covid test providers.
The bill is rapidly growing. Eight of the largest listed virus-testing firms reported a combined 14.1 billion yuan ($2 billion) increase in accounts receivable as of June 30, or a gain of 73% from a year earlier, according to Bloomberg calculations. Among these companies, Shanghai Labway Clinical Laboratory Co. saw the biggest jump of 189%.
The delay in meeting payments underscores the mounting cost -- financially, economically and socially -- of President Xi Jinping’s strict approach to stopping the spread of omicron subvariants. 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, residents need to undertake PCR tests every three days in order to use public facilities or go to work.
Local governments -- which are responsible for covering the cost of mass-testing -- are facing a squeeze. Declining business activities are hurting fiscal revenue, while Covid-related spending is increasing. On top of testing, this expenditure includes the construction of quarantine centers and subsidies for heavy-hit business sectors. They are also targeting new drugs to limit serious illness...