[HONG KONG] The 7.0-magnitude earthquake, which left a wide swath of destruction in Ya’an city in the southwestern province of Sichuan on Saturday, will probably trigger more than 100 billion yuan (S$19.8 billion) of investment for the redevelopment of the disaster area, economists said.
Such investment will help clear the nation’s excessive capacity in the steel and cement sectors, boosting the national economy and offsetting the direct economic loss caused by the quake, they said.
“The earthquake in Ya’an is unlikely to have caused a significant negative impact on the Chinese economy,” Banny Lam, managing director and co-head of research and chief economist at ABCI Securities Co Ltd, said in an interview. The disaster may only slow this year’s gross domestic product (GDP) growth by 0.1 percentage point, he said.
The size and scope of the latest quake, with its epicentre at Lushan county in Ya’an city, is much smaller than the devastation wrought by the one that struck Sichuan’s Wenchuan county in May 2008, Mr Lam said.
Still, the latest earthquake may affect some individual sectors such as the swine industry as Sichuan’s output accounts for 10 to 15 per cent of the nation’s pork supply, he said. Insurers may also face cash pressure as damage claims rise, he said. The death toll in Ya’an city has risen to 188 as of yesterday morning, China.com.cn reported, citing figures provided by the provincial emergency response command centre. Twenty- five people were reported missing, while 11,460 have been injured, the report said.
So far, the number of insurance claims related to the earthquake has topped 295 worth a combined 10.02 million yuan and involving 28 insurance companies, China News Service reported on Sunday, citing the China Insurance Regulatory Commission (CIRC).
Domestic insurers have set up emergency response centres to speed up claims processing and payments, the report said. China Life Insurance and PICC Property & Casualty have donated 51.5 million yuan to the quake-hit areas, it said.
The latest quake in Sichuan will not have much impact on the GDP growth as the economic contribution of the affected areas is not so significant, Zhou Hao, a Shanghai-based economist at ANZ Bank, told the Hong Kong Economic Journal’s EJ Insight.
Although the disaster may cause more than a hundred billion yuan of direct economic loss due to the collapse of buildings, it may at the same time create a growth engine for Sichuan as the central government is expected to roll out a massive redevelopment programme in the province.
Within the next three to five years, investment for rebuilding Ya’an city will be more than 100 billion yuan, he said.
The new Chinese leaders are expected to redevelop Ya’an city at the fastest pace possible as they want to project the public image of a responsive government, Mr Lam said. The central government can use its emergency fund to bankroll the redevelopment, he said. – EJ Insight