Zero-Covid leaves China’s hospitals ill-prepared for exit wave

China’s cash-strapped local hospitals are shunning a government-subsidised loan scheme for equipment upgrades, despite the need to quickly prepare for a spike in cases as Beijing eases its draconian zero-Covid policy.

China’s cabinet, the State Council, announced in September that it would offer local hospitals a total of more than Rmb200bn in loans with interest rates of only 0.7 per cent or lower to buy devices ranging from CT scanners to surgical robots.

But most hospitals have yet to apply for the scheme despite a deadline of the end of this year, according to government advisers and medical equipment makers. Hospitals said China’s zero-Covid regime, which has severely restricted movement in the country and depressed consumption, had undermined their financial health and willingness to take on new loans.

“We have suffered a slump in revenue in recent years as the zero-Covid policy prevented patients of other diseases from seeing doctors,” said the head of equipment at a hospital based in Changzhou, near Shanghai. “We don’t have an incentive to buy new devices.”

After nearly three years of draconian lockdowns, contact-tracing and mass testing, Beijing this month abruptly eased its coronavirus restrictions, unleashing a so-called “exit wave” of infections that has swept through Beijing and other large cities.

Critics have accused Beijing of not adequately planning for the exit from zero-Covid in terms of vaccinations and increasing the capacity of its healthcare system to cope with more severe Covid cases.

But the credit subsidy programme, which ended a 10-year ban on public hospitals purchasing equipment using bank loans, was intended help to modernise the underfunded healthcare system and was part of efforts to stimulate the ailing economy.

Some hospitals jumped on the opportunity. The wealthy eastern province of Fujian in September required every county hospital to apply for at least Rmb100mn in subsidised loans, said an official at the China Association of Medical Equipment.

“Such cheap money is not easy to come by,” said the official.

However, it soon became clear Beijing would struggle to fill the loan quota. The medical equipment association official said hospitals in the country’s under-developed northern provinces had little interest in the scheme even though many of them needed equipment upgrades.

Big hospitals were also cautious about leveraging up. An official at the equipment department of Huashan Hospital, one of the largest in Shanghai, said he would only use low-interest loans to purchase “necessary” devices.

“We are not going on a shopping spree just because the government has made cheap credit available,” said the official.

A lack of business has damped hospitals’ demand for better devices. Zhu Weizhen, founder of a Shanghai-based manufacturer of ultrasound equipment who regularly deals with hospitals across the country, estimated that the Chinese healthcare system’s annual income had fallen one-third since zero-Covid began in 2020.

“Travel restrictions have forced many patients to put off or cancel their doctors’ appointments,” said Zhu. “That has taken a toll on hospitals’ bottom line.”

As uncertainty grew over when and how Beijing would lift its Covid restrictions, hospitals worried they would struggle to pay off even low- interest debt.

“We are not going to take a two-year loan to purchase a CT scanner that takes five years to recoup the investment,” said the Changzhou-based hospital executive. “We don’t know when demand for healthcare services will return to normal.”

Some of those hospitals that did borrow beyond their means were counting on government bailouts if things went wrong, officials said.

In the eastern province of Jiangxi, Jinxi County People’s Hospital last month took a two-year Rmb258m subsidised loan from the China Development Bank, official records show. JCPH made only Rmb112m in revenue from its main operation last year.

That, said an official at JCPH, meant the hospital would need to rely on further government support to pay off the debt even though the local authority’s own revenue had fallen due to zero-Covid.

“We applied for the loan based on political considerations, not business ones,” said the official.

He said the local government was keen to secure the loans to help boost the region’s economy.