BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Quake no big hurdle to growth
By Yi Xianrong (China Daily)
Updated: 2008-05-29 15:17 The May 12 earthquake in Sichuan province has caused big losses in both human lives and properties. In the affected areas, millions of houses collapsed, the transportation, electricity, telecommunication, water supply and gas supply facilities were destroyed. In Sichuan Province alone, 14,207 enterprises were hit by the quake, causing a loss of 67 billion yuan. Professor Niu Wenyuan, a scientist with Chinese Academy of Sciences, estimated that the overall losses of the earthquake in economic terms would reach 130-150 billion yuan ($18.8-21.7 billion). It takes some time to get an exact measure of the losses caused by casualty, the destruction of public facilities and property, damage to reservoirs, dams and hydro-electricity stations and of the dislocation of transportation, businesses and other commercial activities. But one can say even at this stage that the local economy in Wenchuan and its neighboring area has seen sweeping destructions, from which it is unlikely to recover anytime in the near future. However, the quake may not be as damaging to the economy of Sichuan Province or the country. By 2007, the province had a population of 81.7 million, 6.2 percent of that in the whole country. The gross domestic product (GDP) of the province was 1.5 trillion yuan, 4.3 percent of the national GDP. Located in the mountains with a limited number of industrial businesses and limited agricultural output, Wenchuan has a GDP that is 0.3 percent of that of the province. The regions that felt the tremor included Gansu, Shaanxi, Yunnan, Shanxi, Guizhou and Hubei provinces and Chongqing municipality. The total GDP of these areas was 18 percent of the national GDP in 2007. But the economy of these areas suffered only minor setbacks because of the earthquake. Therefore, the earthquake is unlikely to pose a major shock to the Chinese economy. Besides, the central government will earmark huge investments into the affected areas to reconstruct roads, public facilities and houses. This financial input would push up the GDP statistics. Analysts predicted the earthquake would reduce this year's GDP growth by 0.2 percentage points, but the reconstruction after the disaster would boost the country's investment by 0.3 percent. The Chinese economy is not going to be derailed from its track of high-speed growth because of this tragedy. And the macro policies would not change, either. The central bank issued several favorable policies for the disaster-hit areas, but the overall monetary policy remains as tight as it was. The primary targets for the economic policymakers continue to be to check inflation and prevent high-flying growth of investment in fixed assets. (For more biz stories, please visit Industries)
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