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Quake impact on economy 'will be limited'

By Wang Xu (China Daily)
Updated: 2008-05-14 07:51

The earthquake that hit Sichuan province will only have a limited impact on China's economy, although disruption to agriculture in the region might add to the nation's mounting inflation, analysts said.

The quake has damaged factories, buildings, roads and railways in regions of Sichuan.

"Its impact on China's economic growth will be temporary and limited," Sun Mingchun, an economist with Lehman Brothers said. "It should be much less than that of the snowstorms in January and February which affected larger areas and lasted longer."

Analysts said the earthquake-stricken areas of Sichuan province and nearby Chongqing contribute a relatively small proportion to the country's overall economy.

Sun said the areas accounted for 3.5 percent of China's gross industrial output in 2006 and their share of exports was only 1 percent.

JPMorgan Chase economist, Wang Qian, said Sichuan's industrial production was only 2.5 percent of the country's total, despite its rich natural resources and hydropower.

However, analysts cautioned the disaster will disrupt the supply of agricultural produce and power, and this might add to the inflationary pressure the country is facing.

China is now battling its worst inflation in a decade. Last month's consumer price index was 8.5 percent, slightly lower than the 12-year-record of 8.7 percent witnessed in February.

Sichuan's produces 6.1 percent of the country's agricultural output and 7.3 percent of the country's rice. It is also the biggest producer of hogs, 11.6 percent of the country's total, Wang said.

Analysts said the central government might loosen its tight monetary policy for post-disaster reconstruction. It could also easy credit control on investment in infrastructure in the disaster-hit areas in the coming months.