The sheer cost of China’s mass coronavirus-testing campaign since April is expected to exceed the full-year gross domestic product (GDP) of nations such as Iceland and Cambodia, while giving China’s economy a much-needed shot in the arm, according to analysts. An estimated 10.8 billion Covid-19 tests will be carried out in China during the April-June period, at a total cost of 174.6 billion yuan (US$26 billion), researchers with Soochow Securities said in a note on Sunday. And that spending is likely to boost the nation’s economic growth rate by 0.62 percentage points in the year’s second quarter, while also helping to offset the impact of shrinking household consumption on the quarterly GDP, they said. “Since the beginning of June, we have stressed that we can be more optimistic about economic growth in the second quarter,” the note said, citing a number of factors such as central authorities’ inspections of provincial economies; more flexible coronavirus-control measures by localities; and a strong rebound in exports in May . “And there is another important point – that is, an extra pull on GDP through government consumption, via local governments’ roll-out of regular [mass testing] in the second quarter.” Will China’s GDP recovery in June ‘be a watershed for the economy’? Soochow’s estimate came amid debate in China over the pros and cons of relying on free and frequent mass testing to combat the highly contagious Omicron coronavirus variant in a country of 1.4 billion people. Beijing’s insistence on steadfastly adhering to its zero-Covid policy has indeed taken a heavy economic toll on the country in recent months, and some economists have even been “‘cancelled” for questioning the state’s handling of the coronavirus. Now some experts are contending that regular mass-testing facilities – including booths and the testing kits themselves – have become a new type of infrastructure in the country, as authorities look to establish a vast testing network of easily accessible booths. Meanwhile, others are expressing concerns that an interest group composed of coronavirus test suppliers might have formed, and that the heavy spending on tests may be putting too much pressure on local governments or national medical insurance funds. In late May, the National Healthcare Security Administration said local governments should pay for all of their coronavirus-testing programmes with local finances, rather than the basic medical insurance funds. And on Thursday, the National Health Commission stressed that testing “should not become the norm” in regions with no recent infections, and in those that face no risk of imported cases. However, just last month the commission set a target of having at least one testing booth within a 15-minute walk for all residents in major cities. Analysts with Nomura last week cut their forecast for China’s GDP growth rate in the second quarter from 1.8 per cent to 0.3 per cent, year on year. They cited Beijing’s reluctance to transition away from its zero-Covid strategy; the burden of regular virus testing; the sharp contraction of the property sector; the huge funding gap for the government; and a potential slowdown in exports. And economists at Standard Chartered estimated in mid-May that coronavirus testing alone could account for more than 0.7 per cent of 2022’s nominal GDP. Chinese academic warns there are legal risks to normalising Covid testing In their note on Sunday, Soochow Securities researchers said the potential boost of 0.62 percentage points from mass testing would be similar to the impact that the nation’s anti-coronavirus expenditures had on economic growth during the first quarter of 2020. However, the Chinese economy still contracted by 6.8 per cent in the January-March period of 2020 – its first contraction since the end of the Cultural Revolution in 1976. As outbreaks have begun to ease across the country, Soochow estimated that the number of coronavirus tests would decline to 2.4 billion in June, from 3.8 billion in May and 4.6 billion in April. Recently, a number of Chinese provinces have lifted or relaxed mandates requiring proof of negative coronavirus test results. Still, Beijing and Shanghai have resumed mass testing in some districts after spikes in community cases.