Lushan Earthquake Won't Hurt China's Overall Economy, Say Analysts

The 7.0 magnitude earthquake that struck China's southwestern Sichuan province on April 20 is not expected to greatly hurt China's overall economy because Ya'an, a third-tier city, is neither a raw material production base nor manufacturing zone.


The epicenter of this earthquake (some estimated at 6.6) was in Lushan county of Ya'an prefecture, which is home to China's famous giant pandas. Lushan is only 200km away from Wenchuan, the epicenter of the devastating 7.9 quake in May 2008 which was 50 times as powerful. As of April 21, the Lushan quake killed 184 people and injured 11826 with 24 still missing.


The government expects further rise in casualties from those remote villages which are hard to reach, but most likely the death toll won’t rise significantly.


Compared with the Wenchuan quake, the Lushan quake delivers a much smaller hit to the Chinese economy as the quake zone is mainly limited to just one prefecture which is economically unimportant, according to Bank of America Merrill Lynch. Due to the smaller magnitude and the post-2008 rebuilding, local facilities such as infrastructure and major buildings were not hit as severely as the Wenchuan quake.


The Chinese government is expected to rebuild quake-ravaged regions, but the budget could be smaller than the RMB32bn budget post the 2010 Yushu quake in Qinghai province, not to mention the RMB1.0tn rebuilding plan post the 2008 Wenchuan quake. So the impact of post-quake rebuilding is irrelevant for the nation’s macro economy.


BofAML believes the earthquake may bring opportunities for industries such as steel and construction during the post-quake reconstruction, but the impact should not be exaggerated.


"The impact of this earthquake is difficult to assess right now, but preliminary information indicates the losses will be much smaller than those from the Wenchuan earthquake," Zhang Yuanhong, a researcher at the rural development institute under the Chinese Academy of Social Sciences, told China Daily.


Based on calculations on damage from previous earthquakes, the impact of Saturday's earthquake on the country's macro economy will be so small as to be statistically insignificant, Yang Xiaowei, an analyst with Lianxun Securities, told the Global Times.



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