China's Quake Reconstruction May Boost Economic Growth by 0.4%
China's economic expansion this year will get a 0.4 percentage point boost from reconstruction work after the nation's deadliest earthquake in 32 years, a government research agency said.
Disruptions to production will shave off 0.1 percentage point, leaving a net 0.3 percentage point gain, the State Information Center said. The report was in today's China Securities Journal.
The predicted gain from rebuilding is smaller than Deutsche Bank AG's 0.7 percentage point estimate in a June 2 report. The May 12 disaster in Sichuan province left more than 86,000 people dead or missing, destroyed 5.4 million homes and damaged crops, roads, factories, bridges and power grids.
“International examples show that 50 percent of the money for rebuilding is spent within the first 12 months of a disaster,'' said Ma Jun, a Hong Kong-based economist for Deutsche. “That's the basis for our estimate.''
Reconstruction will cost about 170 billion yuan ($24.7 billion) a year through 2010, when the government aims to finish, the State Information Center said. Spending will add 1.1 percentage points to fixed-asset investment growth this year, it said, without estimating what the overall increase will be.
Labor shortages in cities may worsen as people return to their home towns to join relief and rebuilding efforts, pushing up wages, the report said. Nearly 9 million migrants from Sichuan worked in cities in 2006, it said.
Exports, Consumption
The disaster will have a “very limited'' impact on consumption and exports, the report said.
The State Information Center didn't give an estimate for how much the economy will expand this year. First-quarter growth was 10.6 percent.
The government has urged provinces affected by the disaster to impose price curbs on materials such as steel, cement and glass to aid the fight against inflation. Consumer prices jumped 7.7 percent in May.
China will spend 540 billion yuan on rebuilding, Deutsche's Ma said. Urban fixed-asset investment, spending on property and factories, climbed 25.6 percent in the five months through May from a year earlier.
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