BEIJING – Alarmed by China’s stranglehold on mask supplies, dresses, test kits and other frontline weapons to fight the coronavirus, countries around the world have set up their own factories to deal with this pandemic and the epidemics to come.
When the epidemic subsides, these factories could struggle to survive. China has laid the groundwork to dominate the protective and medical supplies market for years to come.
Factory owners get cheap land from the Chinese government. Loans and grants are plentiful. Chinese hospitals are often asked to buy locally, giving Chinese suppliers a large and captive market.
Once vaccines appear, demand will drop. The factories are going to close. But Chinese companies are likely to have the lowest costs by far and be in the best position for the next global outbreak.
“The Chinese have succeeded in weaving the world domination of personal protective equipment with command and control of the supply chain,” said Omar Allam, a former Canadian trade manager trying to establish the production of very N95 medical respirators. requested in his country.
China’s hold on the market testifies to its desire to dominate important cogs in the global industrial machine.
For years, Chinese leaders have worried that the country is too dependent on foreign sources for everything from medical supplies to microchips to airliners. He used subsidies, economic goals, and other government incentives to become a powerhouse in these important industries.
When Chinese leaders worried about pollution and dependence on foreign oil, for example, they helped local manufacturers of solar panels, wind turbines and high-speed rail equipment beat the market. competetion. They have taken similar steps to dominate industries of the future, like the next generation of wireless data transmission, known as 5G.
The strong involvement of the state in its economy has led to waste and grafts that could slow down China’s growth. But policies have often proven effective in construction industries that can withstand losses and fierce foreign competition. Medical supplies can be similar.
“There will be massive consolidation after the epidemic,” said Howard Yu, professor of management and innovation at the Institute for Management Development, a business school in Switzerland. “It will be exactly the same dynamic as in green energy, 5G and high speed rail.”
Before the pandemic, China was already exporting more respirators, surgical masks, medical glasses and protective clothing than the rest of the world combined, the Peterson Institute for International Economics estimated.
Beijing’s response to the coronavirus has only added to this dominance. It increased mask production nearly 12 times in February alone. It can now make 150 tons per day of specialized fabric used for masks, said Bob McIlvaine, who runs a research and consulting firm of the same name in Northfield, Ill.. That’s five times what China could do before the outbreak and 15 times the output of U.S. companies, even after increasing output this spring.
US companies have been reluctant to make big investments in fabric manufacturing because they fear demand for masks will be temporary. But Texas demanded Thursday that most residents wear masks in public places, part of a wider adoption of face masks in recent days.
“It is a huge mistake to assume that the market is going to disappear,” said McIlvaine.
Ma Zhaoxu, deputy foreign minister, said that from March to May, China exported 70.6 billion masks. The whole world produced around $ 20 billion all last year, with China accounting for half.
Other countries now want self-sufficiency. Earlier in the pandemic, China occasionally decided which countries received crucial supplies and requested abundant and public thanks in exchange.
French President Emmanuel Macron pledged in March to produce local masks and respirators by the end of this year. Peter Navarro, industrial policy adviser to President Trump, has started a push for the federal government to purchase American-made pharmaceuticals and medical supplies.
China, however, has a head start.
In 2005, after the SARS epidemic, which killed 350 people in China, the Ministry of Science and Technology announced that it had developed respirators that better adapt to Chinese faces. In 2010, the government’s five-year economic plan ordered to “focus on the development of basic equipment and medical supplies which have high demand, wide application and are mainly imported.”
China has also predicted the importance of nucleic acid test kits, which can detect coronavirus infections. In 2017, the Ministry of Science and Technology identified kits as a “targeted development” industry.
The ministry’s decision was part of the 300 billion dollars of industrial policy “Made in China 2025” to replace imports in many key industries, including medical devices. The ministry called for increasing China’s local market share by 30 to 40 percentage points in each category of medical supplies.
Chinese medical device manufacturers benefited from generous government subsidies. Shenzhen Mindray, a manufacturer of ventilators and other critical care equipment, has received up to $ 16.6 million a year for the past three years, according to company documents. Winner Medical, a mask maker, received between $ 3 million and $ 4 million per year. Guangzhou Improve, a producer of masks and test kits, received between $ 2.5 million and $ 5 million per year.
Shenzhen Mindray and Winner Medical declined to comment, while Guangzhou Improve did not respond to many requests.
Hospitals have started buying locally. Three years ago, the central government required buyers to source from domestic producers who could meet the requirements. Local governments followed suit. Sichuan Province, for example, halved the number of categories for which medical equipment and supplies could be imported. Only the best hospitals could import anything, the provincial government said, while lower-tier hospitals had to buy everything from China.
At least three other large populated provinces – Liaoning, Hubei and Shandong – have made similar announcements.
Such efforts have helped put China firmly at the front of the industry, as Rakesh Tammabattula discovered. A suburban Los Angeles entrepreneur, he shifted his business from manufacturing nutritional supplements and moisturizers to producing medical masks and hand sanitizer in response to the outbreak. To do this, he needed a machine that could compress and cut the fabric to make masks.
He discovered that the machines were only made in China. He had to charter a jet to fly the massive aircraft – 36 feet long, six feet high, and five feet wide – from southern China to Los Angeles.
“It’s not that we can’t do this,” said Mr. Tammabattula, managing director of QYK Brands. “It’s just that we didn’t focus on it.”
The Chinese government has played a major role in building medical equipment this year.
Sinopec, a Chinese state-owned oil company, said it has worked closely with the Chinese Communist Party as it plans to build a factory to make the particle-trapping fabric needed for surgical masks and respirators. .
At one site, 600 engineers and workers worked day and night shifts for 35 consecutive days to build a factory that would normally take a year to build. An “assault team of party members” worked 20 hours straight on February 26 to prepare a warehouse for the project, according to the company.
The authorities have also stepped up efforts to make land available for new factories. Hangzhou City, Zhejiang Province, transferred 1.6 acres to the Jiande Chaomei Daily Chemical Company on February 15 for an emergency expansion of respirator production. Lanxi, a county in Zhejiang, transferred land to the Baihao New Materials Company at the end of February for the production of respirators. Officials in Guangdong Province and Jinan City in Shandong Province have also approved more lenient land policies for medical supply companies.
Government support for the medical supply industry continues. Guangzhou Aoyuan Biotech Company decided this year to switch from its usual activity of manufacturing disinfectant to manufacturing N95 masks. A senior local official immediately visited the company, laid out land for it in an industrial park, and approved all the necessary forms.
Some Chinese economic policy experts argue that their country may be going too far. According to Tianyancha, a Chinese data service, more than 67,000 companies have registered in China this year to make or trade masks. Many start-ups with poor quality control have already encountered problems. The Chinese government has imposed increasingly stringent customs inspections on exports.
“A lot of mask manufacturing companies – especially small and medium-sized ones that appeared much later and don’t have a solid foundation – would face shutdown when they have a surplus of masks and profits start to slide. dive in, ”Cai Enze, a retired deputy mayor and economic planner from central China, wrote in an essay in April. “This marks the start of a crisis.”
Yet the industry at large in China appears to be better prepared for the future.
In Los Angeles, Mr. Tammabattula discovered that even producing hand sanitizer is difficult. He was unable to find a company in the United States that still makes plastic bottles with pump handles. It imports them, on expensive chartered planes, from China.
Mr Tammabattula applied for a federal loan for small businesses trying to produce medical supplies, but the paperwork turned out to be long, intimidating and slow, he said.
“If we were to compare to the Chinese government,” Tammabattula said, “there is simply no support for domestic manufacturing.”
Coral Yang contributed to the Shanghai research.