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BEIJING - CHINA will avoid any severe economic complications resulting from the May 12 earthquake in south-western Sichuan province, economists predicted, amid nationwide mourning over the loss of more than 68,000 lives.
Number-crunchers noted that the damage has mostly been inflicted in remote mountainous terrain, where industry is minimal. This compares against, say, the 1995 quake in Kobe, Japan, which devastated a key manufacturing region.
Even then, analysts added, reconstruction efforts in Kobe helped to boost growth in Japan - which should be the case for Sichuan as well.
Economist Han Xiaoping told The Straits Times that at least 100 billion yuan (S$20 billion) of investment - a conservative estimate - would be required to rebuild the area where some five million people have been left homeless.
This would help generate much-needed job creation and industry in the region, whose direct economic losses were estimated to reach 67 billion yuan, or 0.27 per cent of China's GDP last year.
This stems from damage inflicted on 14,207 businesses, the authorities said.
Analysts believe the final figure could exceed US$20 billion (S$27 billion), taking into account loss of production and tourism.
The direct losses to scenic Sichuan's tourism sector are estimated to exceed 50 billion yuan - about half of its 2007 revenue of 122 billion yuan.
This excludes intangible cultural and historical losses such as the collapse of 1,000-year-old buildings and temples.
But there is a silver lining, said Mr Han, as the 'economic impact is contained mainly within the disaster zone'.
'In fact, rebuilding could help stoke overall growth. My investment forecast of more than 100 billion yuan is still small compared to China's total output,' said the executive vice-president of China5e.com, an influential economic and energy portal that promotes sustainable development in the country.
China's GDP hit 24.67 trillion yuan last year, up 11.4 per cent from 2006 - the fifth consecutive year of double-digit growth.
Premier Wen Jiabao has announced that a 70-billion-yuan government fund has been set up for reconstruction work.
Part of the 35 billion yuan in donations from abroad and domestic contributions will also be used for rebuilding purposes, officials said.
But while China's overall growth has not been sidetracked by the quake, the officials added, the disaster has complicated the urgent task of curbing rising inflation.
China is earnestly battling inflation levels not seen since 1996 for fear that social harmony would be ruined.
Its top planning body, the National Development and Reform Commission, yesterday warned that the quake could fuel inflationary expectations, since Sichuan produces about 6 per cent of China's grains and 5 per cent of its vegetables.
'Disaster recovery and reconstruction may also increase prices for some related goods,' it said in the state-owned People's Daily.
The good news, analysts said, is that such hikes could be temporary.
'What really affects food prices in a sustainable way is climate - big-scale droughts or floods that significantly reduce harvests,' said Professor Yuan Gangming of the Chinese Academy of Social Sciences, citing sufficient grain reserves as one key factor that will enable demand to be met before normal production resumes.
The impact on China's energy sector will also be limited, analysts added, despite Sichuan's role as a key national producer of natural gas.
'Natural gas accounts for only about 3 per cent of China's energy needs, which means production should recover well before it is missed,' said Mr Han.
China plans to raise that proportion to 10 per cent by 2020, to reduce reliance on more pollutive fossil fuels.
What is more crucial to Sichuan now, the analyst noted, is to repair the damage to many of its 396 hydro-electric power stations - the province's dominant source of energy.
'Still, there should be time to get this done since Sichuan's usual energy demands have been significantly reduced after the quake destroyed buildings and homes,' Mr Han said.
He also dismissed fears of higher oil prices - now already at record levels - as a result of greater demand from Sichuan, which is likely to turn to oil and coal for its power needs for now.
'It will be too temporary to be significant,' he said.
vincec@sph.com.sg
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