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After implementing a successful social isolation strategy to control the spread of COVID-19, China resumed its economic activities in March. As the desperate need for face masks and other medical products grows around the world, Chinese factories are transforming their assembly lines to meet the demand. As a result of the pandemic, medical products have become more than a catalyst for economic growth but are also at the center of China's plan for “mask diplomacy.”
Business is booming
Face masks, once both cheap and ubiquitous, have become hot commodities as COVID-19 sweeps across the globe. Before the COVID-19 outbreak, a face mask machine was sold for around RMB 100,000-200,000 yuan (US$14,150-28,300 dollars). Now the price of the machine has more than tripled. However, a machine averages around 100,000 to 160,000 masks per day which means that one device can easily earn RMB 100,000 yuan (US$14,150) per day.
In a popular WeChat post, titled “Crazy Mask/Money-Printing Machine: I Became Rich Overnight,” former e-cigarette businessman Mr. Zhou explained the business’ high-profit margin:
It would not be too exaggerated to use cash printing machine analogy to describe the business. Although the price of melt blown fiber has surged, the average production cost of an ordinary mask is no more than RMB 60 cents (USB 10 cent). Normally it sells for about RMB 30-40 cents and maximum cost is top at 50-60 cents. Now the wholesale price is more than RMB 2 yuan…
In another post, circulating on Weibo, a Zhejiang businessman reportedly set his profit target to over RMB 100 million yuan (approximately US$14 million) in the month of March.
Both US and Europe have their own set of standards for medical products, and manufacturers have to pass quality tests and obtain credentials in order to get the necessary export permits and licenses. Martin Cun, an investor, evaluated the market and pointed out that the real power for companies is to obtain export quality credentials from the US and Europe:
Producing face masks is like printing money but, of course, you need get the certifications from Europe and the US in order to do export business. Just France, with a population of 67 million, has ordered 2 billion masks from China. The combined population of the US and Europe surpasses 1 billion…
Mask diplomacy jeopardized by poor quality
Aside from the economic benefits of this growing business, Beijing has adopted a policy of “mask diplomacy” to strengthen ties with other countries who are in desperate need of medical resources.
However, this diplomacy may not be as effective as planned as many countries are complaining about the poor quality of Chinese medical products. So far, the Netherlands recalled 60 million face masks and Spain recalled 58,000 inaccurate rapid COVID-19 test kits manufactured in China in March.
In an online magazine, Mr. Chen, an export trader, revealed that 60 percent of face mask assembly lines in China are not operating in dust-free rooms — the necessary environment for the production of medical products. He also pointed out that some factories with export licenses are buying face masks from other factories to meet the market demand.
Twitter user @gan_run shared a video of a mask production line:
— run gan (@gan_run) March 25, 2020
This is the so-called cash printing machine in China. Workers can touch the mask and the room is not dust-free. So these are the expensive face masks they sold to us?
While many countries are unhappy with the quality of these medical products, Chinese citizens are also complaining that the factories are selling them for too little:
The total export value is just RMB 10.2 billion yuan (USD 1.5 billion), it seems that majority of the export is gift.
我们不仅要卖，而且要高价卖给美国！ ！ ！
We have to sell the product, mark the price higher for the U.S!
Chinese customs reported that between March 1 to April 4, the country's exports included: 3.86 billion face masks, 37.5 million protective outfits, 2.4 million infrared thermometers, 16,000 sets of ventilators, 2.84 million sets of COVID-19 testers, and 8.41 million sets of protective goggles.