Sichuan Earthquake May Cause a Drop in China's GDP

By Wang Changwei, Broadcasting Corporation of China
May 22, 2008 12:00 am Last Updated: May 22, 2008 12:00 am

A representative of the Korea Trade-Investment Promotion Agency (KOTRA) in Beijing said that due to the catastrophic earthquake in Sichuan Province, it is likely that China's Gross Domestic Product (GDP) will drop by 0.4 to 0.7 percent.

Production has stopped in high-tech companies such as Intel and world-renowned semiconductor manufacturing plants in the newly constructed industrial regions of Chengdu City, Sichuan. As a result, there may be a shortage of semiconductor supplies.

Sichuan also is responsible for 10 to 15 percent of China's zinc production. Since the earthquake, ten zinc extraction plants have stopped production causing international zinc prices to rise.

The KOTRA representative also pointed out that the earthquake might have increased the amount and size of loans, further increasing the pressure of inflation.

According to Lehman Brothers, an American investment bank, Sichuan is responsible for only three or four percent of the national GDP. The bank indicated that the earthquake's biggest effect on the Chinese economy might be pressure for economic inflation.

Sichuan produces 20 percent of China's grains and vegetables. The province also produces eight percent of the country's corn and 14 percent of its soybeans. Therefore, an increase in prices of agricultural commodities is likely. Since Sichuan is also home to many pig farms, the price of pork is expected to rise by six percent. These effects could push the consumer price index up by 0.3 percent.