BEIJING — While the Chinese government still hasn't put a definitive price tag on damage caused by last month's devastating earthquake in Sichuan, economists and central government planners say the economic ramifications go far beyond the destruction of homes, businesses and lives.
Inflation, agricultural production, supplies of building materials and tourism are all expected to take a hit from earthquake-related destruction and reconstruction. Rebuilding in quake-devastated areas will likely present the largest of the economic challenges. The government has said it will take three years to rebuild the affected areas of the Sichuan province, where some five million people remain homeless after the 7.9-magnitude quake on May 12 that killed at least 69,000 people. Aftershocks remain a major concern.
The French investment bank Société Générale warned that the earthquake and its long-term aftermath will have a "profound impact" on investment in China, and rebuilding after the quake will likely cost the government $60 billion. The bank pointed to trends in other quake-struck areas such as food shortages and fast-rising inflation.
As yet, China's leaders have not named a cost for the rebuilding projects in Sichuan, but have ordered all government departments to cut their spending by 5 percent and scale back on travel to inject money into a rebuilding fund. Yet despite the heavy cost calculations for rebuilding homes and businesses lost, top leadership insists the Sichuan earthquake will not have a major impact on the country's overall economy and growth.
In a press conference on May 28, officials from the National Development and Reform Commission, China's central economic planning body, said because Sichuan's economy accounts for less than 4 percent of the country's gross domestic product, the nationwide impact of the earthquake will be negligible. Mu Hong, vice director of the commission, said the government is watching for price gouging in the affected areas and believes the impact on inflation will be temporary.
"The quake will be a heavy blow to the local economy as many assets and production facilities were destroyed. But it will have a very limited impact on the country's economic fundamentals," said Mu.
In spite of that optimism, the Chinese central bank warned of rising inflation from the fallout of the earthquake, especially in building materials like concrete and steel. China has already been battling record-paced inflation for several months, as officials worry fast-rising consumer prices will shake the country's social stability. Consumer prices rose by 8.5 percent in May over last year, continuing this year's trend of near-record highs.Government officials have pledged to keep inflation at or below last year's 4.8 percent, but the first five months of 2008 have all clocked in above that. In its report on the earthquake, the People's Bank of China said while Sichuan only makes up 0.25 percent of national production, there are many economic concerns surrounding the disaster. The massive reconstruction efforts will heighten demand for steel, concrete and other building supplies and have an impact on inflation, the central bank warned.
Though the bank's report, published in a state securities journal, said the inflationary pressure would be temporary, it said the government should adjust monetary policies as needed. "Inflationary pressures remain the biggest risk in the economy," the bank's report said. "Curbing price rises remains the government's key task."
In addition to concerns about inflation, the earthquake pummeled Sichuan's tourism industry, government figures indicate. The province has long been popular with tourists for its scenery and wildlife, including the primary habitat for China's great pandas. The China Tourism Industry reported the earthquake killed 54 tourists and that thus far, it has cost Sichuan and neighboring Shaanxi provinces $7.6 billion in lost revenues. The agency also said some 300,000 people have lost tourism-related jobs.
Meanwhile, Chinese economists say there is no clear solution about how the government should handle the aftermath of the earthquake. Several were critical of a central bank decision ordering state-run commercial banks to write off loans held by businesses and individuals where the property was destroyed. The bank also ordered commercial banks to forgive loans and credit card debt of those who were killed. It has not yet outlined how those millions of dollars in write-offs will be paid.
Zhang Ming, an economist with the Chinese Academy of Social Sciences, said the government's decision to write off bad loans from the quake was "morally understandable," but not in line with how a market economy should react. He said the government should issue disaster relief bonds rather than step directly into banking.
"It will be helpful to the affected areas, but it's bad for the overall inflation rate of the country," said Zhang. While it will undoubtedly take more time to add up all the costs for the country, Zhang and other economists agree on one thing: The earthquake has set back the local economy in the devastated areas by 20 years.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)