The Economic Impact of the Sichuan Earthquake

Filed in archive News on July 8, 2008

With the earthquake of May 12 over eight weeks behind us, it has become clear that the disaster will do little if anything) to slow China's heady economic growth.

A number of sources have looked at the potential for economic impact from the Sichuan Quake - including the NY Times and NPR.

The 7.9 magnitude quake was centered in rural Wenchuan County, about 80 kilometers (50 miles) northwest of the Sichuan capital, Chengdu. The quake killed about 90,000 (almost 70,000 confirmed dead and over 18,000 still missing) and left some five million people homeless. Almost 375,000 people were injured. And the economic damage is estimated at around $20 billion.

So why is the national economic impact so low? There are several reasons...


© kriskaer




First, the epicenter of the quake was in a very rural area. Almost none of China's industrial and commercial base was directly impacted or damaged by the quake. Even the agricultural impact has been limited.

Second, what economic damage did occur will probably be offset by the resulting construction boom. China will rebuild the damaged areas. The rebuilding process will actually further stimulate some areas of the economy.

In the words of one analyst, the economic impact on China of this years earthquake in Sichuan is "a wash." The most significant impact will most likely be that the construction boom will increase inflation in China - which is already at about 9% per year.

Sichuan itself has probably suffered greater economic damage from the closure of Tibet. Sichuan Province is a tourist hub and gateway serving Tibet. But tourism dried up when the government in Beijing closed Tibet to foreign visitors for over three months back in March. Tibet was reopened only this week...