Mon, May 19, 2008 - Page 11 News List

Quake effect on economy of PRC mild

WORLD FACTORY FLOOR Sichuan's GDP grew at 14.5 percent in this first quarter of this year and development occurred in areas that were spared the worst damage

AFP , BEIJING

With its terrible human cost but limited economic impact, China's earthquake has thrown a spotlight on the regional disparities in development in the rapidly growing country.

Factories in the boomtowns of the east coast have fuelled China’s double-digit economic growth and won the country a reputation for being the world’s factory floor.

But the earthquake in the southwestern Sichuan region is believed to have killed more than 50,000 people and damaged more than 15 million buildings.

The government of one city alone, Deyang, has estimated the economic cost locally will be 200 billion yuan (US$28.5 billion).

Nonetheless, analysts doubt that the tragedy will dent China’s rising economic might.

“It happened in a region of mountains and forests, which is less developed and has a poor population,” said Hu Yifan, an analyst at the Natixis banking group.

“It has a limited impact on the macro level,” she said.

With 87 million people in its area of 485,000km², Sichuan has a larger population than Germany.

But it contributes only 4.2 percent to China’s GDP and serves as the base for a mere 0.6 percent of China’s exports, research by Lehman Brothers showed.

Sichuan “is a major province in terms of population and agriculture, but its part in industrial production and manufacturing is relatively small,” said Sun Mingchun (孫明春), an economist at the firm.

Monday’s quake, however, left analysts shuddering at the potential impact if it had hit the Pearl River Delta, the southern hub of manufacturing that includes Guangzhou and Shenzhen.

“There would be no comparison if the same disaster had struck the Pearl River Delta, which accounts for 30 percent of exports and 10 percent of GDP,” said Jean-Francois Huchet, director of the Hong Kong-based French Centre for Research on Contemporary China.

Sichuan has nonetheless seen rapid economic growth in recent years as the government tries to spread the recent wealth.

Sichuan’s GDP grew at 14.5 percent on an annual basis in the first quarter of this year, outpacing the 10.6 percent for the country as a whole, official data showed.

But the development has been mostly limited to isolated urban pockets including Chengdu and Chongqing, an autonomous area bordering Sichuan. Both escaped lightly from the earthquake.

“You can see from this how wealth has been distributed and how limited it has been in the west. Growth has essentially been concentrated in the coastal provinces of the east,” said Valerie Niquet, researcher at the French Institute for International Relations.

She said the earthquake would certainly have a serious impact on daily life for Sichuan residents.

The agriculture ministry said on Saturday that the earthquake had severely damaged the farm infrastructure of Sichuan and that it would be difficult to immediately resume full agricultural production.

However, the ministry promised that stepped-up production in other provinces would prevent food shortages of further rises in food prices nationwide.

Sichuan also suffered major destruction to infrastructure — including, tragically, the destruction of close to 7,000 schools as children were in class.

“The state had withdrawn and left it up to local governments, which didn’t have the means they needed,” Niquet said of the infrastructure.

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