The economic consequences of massive floods

Large swathes of Central and South China have been hit by rainstorms and floods since June, reminding people of the massive floods of 1998 that claimed at least 1,800 lives and affected more than 100 million people along the Yangtze River. The current spate of floods, in all likelihood, will cause more economic damage than 18 years ago in the affected areas that include 11 provinces, regions and municipalities along the Yangtze River and Huaihe River.

Indeed, the disastrous floods of 1998 extended up to the Heilongjiang and Nenjiang rivers in Northeast China, and led to direct economic loss of about 248 billion yuan ($37 billion) that accounted for about 3 percent of that year's total GDP. The ongoing floods may not be as destructive in terms of the percentage of GDP today but the fact that the urban population has increased exponentially in the affected regions during the past 18 years means torrential rainfall will not only take a toll on rural areas and farmlands but also cause greater economic loss, compared with 1998, in major cities like Wuhan and Nanjing in Hubei and Jiangsu provinces.

Foreseeable hikes in the prices of agricultural products, following a bad harvest owing to natural disaster, could also lead to notable inflation in the second half of this year.