The Economic Cost of the Earthquake
PaPaPeng
Its pretty impressive the authorities can come up with accurate
figures on the economic consequences of the Sichuan earthquake.
China picks up the pieces
By Olivia Chung
June 4, 2008
http://www.atimes.com/atimes/China_Business/JF04Cb01.html
HONG KONG - As the death toll from China's May 12, 8.0 Richter-scale
earthquake climbs toward the 70,000 mark, with 15 million people
rendered homeless, companies are struggling to get back on their feet
- lamenting their lost staff while giving thanks to varying degrees
for the extent to which their property survived the disaster.
A 70 billion yuan (US$20 billion) government reconstruction fund is
underpinning recovery efforts in the stricken southwest Sichuan
province, with vast amounts of infrastructure requiring attention. The
economic losses will definitely be larger than those caused by the
once-in-50-years snowstorm that hit central China this year, National
Bureau of Statistics deputy head Xu Xianchun said in Beijing last
week.
The impact on economic growth will still be less than 0.1%, but the
disaster will put considerable upward pressure on inflation, making it
difficult for Beijing to meet its 4.8% full-year target, he said.
And while individual factories can be rebuilt in Sichuan or elsewhere,
the area's vital tourist industry will be harder to bring back to
life. The quake damaged 1,645 cultural relics in Sichuan, including
148 regarded as precious.
Direct economic losses caused by property damage, and indirect losses
caused by business interruption, are expected to reach 500 billion
yuan, BNP Paribas financial analyst Doris Chen wrote in a research
report last week.
The overall impact on the country's economy will be limited due to the
province accounting for only 4.3% of national gross domestic product,
said Yi Xianrong, a researcher with the institute of finance and
banking under the Chinese Academy of Social Sciences. Sichuan, with a
population of 81.7 million, has a gross domestic product (GDP)of 1.5
trillion yuan.
The worst-hit cities in Sichuan, including the provincial capital
Chengdu, Mianyang, Deyang and Mianzhu, which together account for
about 2% of national GDP, Liu He, deputy director of the Office of the
Central Leading Group on financial and economic affairs, said.
In terms of industrial added-value, Sichuan accounts for 3.1% of the
country's total, with the worst-hit cities representing only 1.3%, Liu
said.
Disruption to production caused by the earthquake would reduce
national second-quarter GDP growth by 0.3 percentage points, but this
is likely to be made up by post-quake reconstruction in the second
half, HSBC economist Qu Hongbin said.
Even so, the local impact of the disaster will clearly be much more
severe, with agriculture also being hit hard, along with industry and
tourism.
Sichuan is China's major pork- and rice-producing province, producing
10.4% of the country's meat and 5.8% of its grains, Liu said. "The
disaster-hit areas produce about 4.3% and 1.6% of the country's meat
and grains respectively," he said. With local production hit, help in
meeting demand in the area may have to come from elsewhere, he said.
Pork is the most consumed meat in China.
Qu echoed Liu's views, saying high food prices will last longer than
they would have otherwise. Inflation is now more likely to stay around
8% in the coming months.
Reconstruction will also help to put pressure on prices, officials
said. "Post-quake reconstruction will exacerbate already overheated
demand for metals and other commodities, thereby adding to inflation
pressures," Qu said. "All this leads us to revise our full-year
consumer price index [CPI] projection for 2008 to 6.8 % from 6.4%," Qu
said.
The CPI, the main gauge of inflation, rose 8.5% in April from a year
earlier, up from a 8.3% gain in March.
The Sichuan quake caused 67 billion yuan worth of damage to a total of
14,207 private and state-owned industrial enterprises, the Ministry of
Industry and Information Technology said on May 19.
China National Chemical Corp and China Railway Engineering Corp were
among 152 state-owned companies affected. Others included Dongfang
Electric Corp, Sinohydro Corp and State Grid Corp of China, for a
combined 30 billion yuan in losses.
More than 3,000 employees of state-owned companies were either dead,
injured or missing after the disaster, Li Rongrong, director of the
State-Owned Assets Supervision and Administration Commission (SASAC),
said earlier.
Dongfang Steam Turbine Plant, which provides 20% of the operating
revenue of Shanghai-listed Dongfang Electric Corp, China's
second-biggest maker of power equipment, is still counting its losses
in Hanwang town in Mianzhu.
Chen Xinyou, deputy general manager of the plant, said several of its
buildings collapsed, killing about 100 of the more than 5,000 workers,
while the total death toll including families killed in the
residential compound was about 400.
Even so, the quake has had marginal impact on the company's boiler and
power generator businesses, Chen said. "Except for the steam turbine
plant in Mianzhu, other plants under the company have started
operating since May 19."
Dongfang Steam has already secured a total of 2,000 mu of land (133
hectares) in Deyang economic development zone and the Tianyuan
economic zone, both in Sichuan, for reconstruction, Chen said,
reflecting pledges from Vice Prime Minister Li Keqiang and the SASAC's
Li Rongrong that the central government and the commission will do
their best to help reconstruction efforts.
Dongfang Electric has signed contracts with several companies since
the quake, including a 4.5 billion yuan deal with China Huaneng to
provide six thermal power units, each with a capacity of 660 megawatts
(mW). The company will also provide several wind power units, with a
combined capacity of more than 4,000 mW.
"Within six months, we will have recovered about 80% of our pre-quake
production capacity," Chen said. "We will be back in full swing within
two years."
Dongfang Electric shares had gained 5.96% to 34.65 yuan by Monday from
32.70 yuan on May 26 on the Shanghai Stock Exchange. That still leaves
them about 23% down from their May 12 price of 44.85 yuan.
Other enterprises getting back on their feet include computer chip
makers Intel Corp, the world's largest, and Semiconductor
Manufacturing International Corp (SMIC), the biggest made-to-order
chip maker on the mainland. Both reopened their facilities after
halting operations briefly.
Intel's chip assembly and test facility in Chengdu, 88 kilometers from
Wenchuan, the earthquake epicenter, returned to full capacity on May
16, Joe Chen, a company spokesman in Shanghai, said. The plant, which
is used to package and test silicon components, suffered no structural
damage as it was built with an anti-earthquake design, he said.
Intel invested $525 million in establishing the facility in Chengdu,
which employs 1,600 workers. It has another assembly and test facility
in Shanghai and will start operating a $2.5-billion wafer plant in
Dalian in 2010.
"Our quick reopening has indicated our confidence in relief and
reconstruction work in Sichuan," he said.
SMIC halted operations at its Chengdu assembly and test plant on May
12, reopening the following day. "Given the experience of overseas
employees, including those from Taiwan, many of whom went through a
6.5-magnitude earthquake that struck Taiwan in 1999, our facility has
an anti-earthquake design, so none of the 1,500 employees [in Chengdu]
were hurt and no major equipment was damaged," SMIC's acting chief
financial officer Morning Wu said in Shanghai. She estimated total
damage at the Sichuan facility at between $2 million and $3 million.
The area's aluminum industry looks to be taking longer to get back on
its feet. Sichuan Aostar Aluminum Company and Sichuan Guangyuan
Aluminum Company, with a combined smelting capacity of 400,000 tonnes,
both face production curbs due to a mixture of plant damage and supply
disruptions.
The cost of damage at Sichuan Guangyuan Aluminum Company, which has a
smelting capacity of 150,000 tonnes, will reach hundreds of millions
of yuan, a company official named Zhang said on the phone. None of the
1,000 employees was killed, although a few suffered slight injuries in
the earthquake, she said.
Zhang said equipment was damaged, but "the reason for the company's
failure to return to full capacity is the shortage of raw materials
due to disrupted transport links".
Sichuan Aostar, the largest producer of the metal in the province, had
enough material stockpiled to feed its plant for 10 days, Tang Yan, an
operations manager, was quoted as saying by China Daily.
Transport on the main Baoji-Chengdu railway has been disrupted,
cutting a third of Aostar's monthly alumina supply of 22,000 tonnes
for one of its two plants. That adds to the woes of a company already
concerned about the impact of a strengthening local currency, falling
consumption in the US and macroeconomic control policies imposed in
the country to rein in fast growth.
China will continue to implement policies to prevent prices and
investment in reconstruction work from rising too fast, though it
should meet the needs of enterprises for quake relief, Zhou Xiaochuan,
governor of the People's Bank of China, said in a statement on the
central bank's website.
Meanwhile, the earthquake may have dealt a crushing blow to Sichuan's
tourism sector, with its ancient monuments severely damaged where they
have not been utterly wrecked and the much-admired natural scenery
ravaged by landslides.
Sichuan, the only province in the country whose tourism revenue makes
up more than 8% of the provincial GDP, last year received 1.86 billion
domestic tourists and 1.71 million from overseas. Turnover from
tourist spending jumped 24.3% last year to 121.7 billion yuan.
Zhang Gu, director of the Sichuan Tourism Bureau, was quoted as saying
by China Daily that direct economic losses in the tourism sector
caused by the earthquake are estimated to exceed 50 billion yuan.
Olivia Chung is a senior Asia Times Online reporter.
Al Bundy
PaPaPeng wrote:
> Its pretty impressive the authorities can come up with accurate
> figures on the economic consequences of the Sichuan earthquake.
>
> China picks up the pieces
If anyone really cares, they can click on the news rather than reading
your endless posts.
The Chinese are a great people and will deal with this.
rick++
its general practice everywhere for 60 years.
Some parents were complaining about shoddy schools
which killed tens of thousands of only-childs.
And they got arrested for protesting.
Chloe
news:7olf44h8jfonnog6r...@4ax.com...
>
> Its pretty impressive the authorities can come up with accurate
> figures on the economic consequences of the Sichuan earthquake.
They're economic projections, or, as the old quote goes, "You can put all
the economists on earth end to end, and they'll go in every direction." What
in heaven's name makes you assume the numbers are "accurate?"
Oh, wait. I remember now. They're CHINESE. Nevermind.
Mark Anderson
> They're economic projections, or, as the old quote goes, "You can put all
> the economists on earth end to end, and they'll go in every direction." What
> in heaven's name makes you assume the numbers are "accurate?"
I believe the quote was more like "you can line up all the economists in
the world end to end and they wouldn't reach a conclusion."
Rod Speed
> Its pretty impressive the authorities can come up with accurate
> figures on the economic consequences of the Sichuan earthquake.
Nope, they're just plucked out of someone's arse.
> China picks up the pieces
> By Olivia Chung
> June 4, 2008
> http://www.atimes.com/atimes/China_Business/JF04Cb01.html
> HONG KONG - As the death toll from China's May 12, 8.0
> Richter-scale earthquake climbs toward the 70,000 mark,
> with 15 million people rendered homeless,
Those figures arent anything like accurate either.
> companies are struggling to get back on their feet - lamenting
> their lost staff while giving thanks to varying degrees for the
> extent to which their property survived the disaster.
> A 70 billion yuan (US$20 billion) government reconstruction fund
> is underpinning recovery efforts in the stricken southwest Sichuan
> province, with vast amounts of infrastructure requiring attention.
There is no nice tidy 'fund'
> The economic losses will definitely be larger than those caused by the
> once-in-50-years snowstorm that hit central China this year, National
> Bureau of Statistics deputy head Xu Xianchun said in Beijing last week.
Hardly a very surprising observation.
> The impact on economic growth will still be less than 0.1%,
Too early to say that.
> but the disaster will put considerable upward pressure on inflation,
> making it difficult for Beijing to meet its 4.8% full-year target, he said.
Usual waffle.
> And while individual factories can be rebuilt in Sichuan or elsewhere,
> the area's vital tourist industry will be harder to bring back to life.
Duh.
> The quake damaged 1,645 cultural relics in Sichuan, including 148 regarded as precious.
> Direct economic losses caused by property damage, and indirect losses
> caused by business interruption, are expected to reach 500 billion yuan,
Just a round number plucked out of someone's arse.
> BNP Paribas financial analyst Doris Chen wrote in a research report last week.
Chen's arse, clearly.
None of the rest of this mindless waffle worth bothering with.
Chloe
news:MPG.22b1eebf5...@chi.news.speakeasy.net...
Thanks. Much better!
PaPaPeng
I posted in the wrong newsgroup. But I am still impressed cuz if you
know where the economic damage is you can plan which problem to attack
first. In three years everything will be restored and built over.
You wouldn't know that that had been a total leveling of everything
before. What you think had never mattered. You have enough troubles
of your own.
Al Bundy
PaPaPeng wrote:
> On Thu, 5 Jun 2008 07:30:19 -0700 (PDT), Al Bundy
> <MSfo...@mcpmail.com> wrote:
>
> >
> >
> >PaPaPeng wrote:
> >> Its pretty impressive the authorities can come up with accurate
> >> figures on the economic consequences of the Sichuan earthquake.
> >>
> >> China picks up the pieces
> >
> >If anyone really cares, they can click on the news rather than reading
> >your endless posts.
> >The Chinese are a great people and will deal with this.
>
>
> I posted in the wrong newsgroup.
Fair enough triple P. But even when the lucid moment struck and you
posted it to the China group, there was only a single mockingbird
reply there. You got more action trolling on this site.
PaPaPeng
I am impressed frugal Al. You do OWN this newsgroup!