The May 12 earthquake may help to accelerate China's gross domestic product growth by a net 0.3 percentage point due to the demand created by reconstruction, the State Information Center said yesterday.

The research unit under the National Development and Reform Commission, the country's top planner, said in a report that a direct loss of around 514 billion yuan (US$74.7 billion) after the quake won't change the fundamentals of China's economy.

And reconstruction will outweigh the short-term disruption to production and instead give the GDP growth a small boost, it said.

"The 13 counties ravaged by the May 12 earthquake in Sichuan Province contributed 0.34 percent of the nation's total production. So its influence over China's economy was limited," said the report.

Direct losses from the quake may drag down the nation's GDP by 0.1 percentage point. However, demand created by reconstruction work will boost GDP by 0.4 percentage point, outweighing direct losses.

The NDRC said it may take three years to finish the primary reconstruction work. The central government may allocate about 170 billion yuan each year in the quake-hit areas and lift the nation's investment ratio by 1.25 percentage points.

Meanwhile, the quake will create new demand for daily necessities and other durable goods for households in the affected areas. The State Information Center earlier estimated China's GDP will likely grow 10.8 percent in the second quarter this year.

But the quake may intensify inflationary pressure, said the report.

"Sichuan Province is one of China's major agricultural production bases, which accounts for 7.2 percent of China's total farm output. Also, the acceleration of investment may raise producer prices and relaxed credit controls in quake-affected areas may add pressure to the inflation combat," said the report.

Sichuan Province is a major source of migrant workers. If many return to Sichuan to join the reconstruction work, areas such as Guangdong Province and the Yangtze River Delta region could face labor shortages and may have to raise wages to get enough workers.

(Shanghai Daily June 19, 2008)