News Archive
Costs in Sichuan could exceed $20bn
Released on 16/05/2008
The disaster modelling firm AIR Worldwide has estimated that the cost of the 7.9 magnitude earthquake, which has killed more than 15,000 people in China’s Sichuan province, could exceed US$20 billion (£10 billion).
The company’s estimate covers the reconstruction of residential and commercial properties in Sichuan, as well as construction-all-risks (CAR) and erection-all-risks (EAR) insurance policies.
But AIR Worldwide, which uses property and insurance data to estimate the cost of disasters, cautioned that the figures were preliminary at this stage as the full damage could take weeks to assess.
To illustrate the unpredictability, AIR recalled the 7.5 magnitude Diexi earthquake that struck the same region in 1933 and caused landslides that disrupted rivers. One dam broke 45 days after the event, resulting in more than 10,000 deaths and transforming initial estimates of cost. Something equally unforeseeable could happen this time, AIR said.
Despite the high cost of reconstruction, many analysts said the earthquake would provide merely a “transitory jolt” to China’s booming economy, and markets had already begun making rapid recoveries just two days after Monday’s events.
Both the Shanghai Composite Index and the Shenzhen Composite index were rising by Wednesday, reversing Tuesday’s losses. The gains were led by construction companies which expected rising demand as China rebuilds damaged areas.
Sichuan Guodong Construction surged by the 10 per cent daily limit to CNY8.92 and Sichuan Golden Summit Group also soared by the 10 per cent daily limit to CNY7.56. Sichuan Road and Bridge Group Co Ltd and Chongqing Road and Bridge Co Ltd also attained their daily allowable limits.
“The heavy reconstruction in the earthquake’s aftermath is expected to boost construction firms’ business,” TX Investment Consulting Co Ltd analyst Wu Feng told The People’s Daily.
Cement stocks also gained on expectations of higher prices due to reconstruction demand. Among the gainers, Huaxin Cement, Ningxia Saima Industry and Fujian Cement had all reached the 10 per cent daily trading limits by Wednesday.
In Japan, Tokyo’s benchmark Nikkei index rose as shares of bulldozer and heavy equipment makers, such as Komatsu Ltd, climbed on expectations of higher demand due to the cleanup and rebuilding from the earthquake.
