Economic jolt from China's quake seen as limited

Although far inland, Sichuan is the site of major gas fields, coal mines and the industries that have grown up around them. Past policies promoting industrialization away from coastal areas mean the region has many factories.

China’s main state-owned power company reported that the quake knocked out at least eight power plants and eight transformer substations.

China’s economic planning agency ordered industries to ensure supplies of power, coal and medicine to areas hit by the quake. Banks were told to make sure adequate cash was available, while the Commerce Ministry called for companies to provide emergency shipments of instant noodles, cell phones and other needed equipment.

The earthquake is likely to cause less and lighter damage to the broader economy than severe snowstorms that paralyzed much of south-central China in January and early February, analysts said.

That disaster snarled transportation, knocked out power grids and forced a halt to aluminum smelting and other production in many parts of the country. But China’s economy cooled only slightly, expanding 10.6 percent in January-March from a year earlier, compared with an 11.2 percent expansion in the previous quarter.

“Compared with the snowstorms, this is confined to one area and it is a very brief time,” said Feng Yuming, an analyst with Oriental Securities in Shanghai.

Sichuan and the adjacent industrial center of Chongqing account for only about 3.5 percent of the country’s total manufacturing and 1 percent of total exports, according to Mingchun Sun, a Lehman Brothers economist.

“While the quake caused significant damage to human lives and infrastructure, we expect its impact on China’s economic growth to be temporary and limited,” Sun said in a report Tuesday.

Still, Sichuan produces about 9 percent of China’s total rice harvest. Even if there’s little disruption to crops, given recent worries over shortages and surging prices, the disaster could fuel panic buying that would drive prices higher.

Strong demand for food, consumer items and construction materials could push prices higher at a time when China already is struggling to contain inflation, which remains near decade-high levels.

But those pressures are bound to fade, as authorities restore roads and supply networks, said Qian Wang, an economist with JPMorgan Chase Bank in Hong Kong.

“Experience shows that inflation or disruption of economic activities caused by natural disasters tends to be negligible and temporary,” Wang said. “Meanwhile, we believe that post-earthquake reconstruction would pick up significantly, providing a strong boost to the regional economy.”

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