Post-quake reconstruction to exceed CNY500bn

04 June 2008 11:09  [Source: ICIS news]

SHANGHAI (ICIS news)--Reconstruction spending in the wake of China’s 12 May earthquake will exceed yuan (CNY) 500bn ($72.2bn) in the next three years and will help boost economic growth, said Deutsche Bank economist Ma Jun on Wednesday.

 

Peak spending would be incurred from the fourth quarter of 2008 to the second quarter of 2009, he added.

 

During the peak spending period, reconstruction would boost China’s fixed assets investment growth by three percentage points and gross domestic product (GDP) by 1.3 percentage points.

 

As for the impact on the chemicals market, Ma said reconstruction would boost performance of investment goods but would heighten concerns over inflation and margin pressure on downstream sectors.

 

“So we raise our ‘08 GDP growth forecast by 0.7 percentage points to 10.7% and upgrade our ‘09 growth forecast by 0.4 percentage points to 9.7%,” he said.

 

On the negative side, the expected disinflation for the second half of this year would likely become more modest due to the upward pressure on raw material prices, the economist added.

 

“We expect Consumer Price Index (CPI) inflation to be boosted by 0.4 percentage points in 2009 from [the] original forecast of 4.3% due to the reconstruction programme,” he added.

 

The disaster, which devastated the southern province of Sichuan, killed more than 69,000 people.

 

($1=CNY6.93)

 

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By: Dolly Wu
+65 6780 4359

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