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China quake to trim growth at least 0.2 points

SHANGHAI - Southwest China's massive earthquake is expected to bring down the nation's soaring economic growth in 2008...

...by at least 0.2 percentage points, state media said Monday. The May 12 earthquake will lead to a one-month production stoppage and curb consumption in worst-hit Sichuan and some neighbouring areas, the China Securities Journal reported, citing domestic economists.

But the impact is likely to be short-lived and the quake could eventually boost investment, a major driver of China's economic growth, through reconstruction efforts, it said.

'Although the quake disaster will have a negative impact on growth in the economy and on corporate earnings in the second quarter, the impact would be a short-term one,' said Zhu Jianfang, an economist with CITIC Securities.

China's economy, the world's fourth-largest, grew 10.6 percent in the first quarter from a year earlier after expanding by 11.4 percent in 2007, the fifth consecutive year of double-digit economic growth.

Zhu, who expected the quake to strip 0.2 percentage points off economic growth this year, said the economy would return to normal growth in the third and fourth quarters.

Another Chinese brokerage, BOC International China, expected the quake to lower annual growth in gross domestic product this year by 0.4 to 0.7 percentage points, according to the report.

The direct economic losses caused by the quake will be 'much larger' than the fierce snowstorms that hit China in January and February, the report said, citing Fan Jianping, economist with the State Information Centre, a government think tank.

The confirmed death toll from the quake disaster rose to nearly 32,500 on Sunday, the government said, although it had earlier said the final toll could top 50,000.

In 2007, the gross domestic product of Sichuan was 1.05 trillion yuan (150.1 billion dollars), accounting for about 4.3 percent of the country's economy, official figures showed.

Economists note that the financial impact of the disaster would have been much more severe had the earthquake struck the bustling eastern coastal regions, the manufacturing base for China's lucrative exports.

But even though the overall impact on growth is seen as limited, the earthquake in the heavily agricultural region may prolong a spike in inflation, a key concern for China which has been tightening monetary policy.

The annual growth of the consumer price index (CPI) rebounded to 8.5 percent in April, after hitting a near 12-year high of 8.7 percent in February but weakening to 8.3 percent in March.