China Faces Economic Aftershocks

China continues recovery efforts after a devastating 7.9-magnitude earthquake hit central China on May 12, 2008, and rendered millions of people homeless.
By Ariana Eunjung Cha
Washington Post Foreign Service
Monday, May 19, 2008

SHIFANG, China, May 18 -- Statistically speaking, Zhang Zhengjie and his factory are fine.

Number of workers injured: zero. Number dead: zero. The factory's steel-reinforced walls shook but held during last week's massive earthquake. After it was over, the only evidence that something nightmarish had taken place in other parts of the city was the presence of minor fractures in pipes that were easily fixed.

Yet the fertilizer factory hasn't been operational since the quake struck last Monday. It isn't a problem with supplies or machinery. It's the employees.

"People have a sense of panic and dare not go into the factory to work," said Zhang, a salesman at Shifang Anda Chemical Co., which exports most of its products to the United States and Europe.

As the initial chaos of the disaster zones is being replaced by an eerily orderly rescue and cleanup effort by the military, China's leaders are turning their attention to the survivors and the economic consequences of fear.

Many thousands in and around the quake's epicenter in Sichuan province are living in tent cities or on their lawns -- even though their houses are perfectly fine.

Laborers are refusing to return to work until government inspectors sign off on the integrity of the buildings, despite the fact that it might take months or years before they get around to every company.

And residents are hoarding medicine and donning face masks in areas that public health officials have said are free of disease.

Premier Wen Jiabao last week called the quake the "most destructive" since the People's Republic was formed in 1949. It has claimed at least 32,500 lives, left as many as 5 million homeless and razed $20 billion worth of buildings. An additional 9,500 people are believed to be still buried under the destruction and likely dead. On Sunday, China announced that three days of national mourning would begin Monday, with flags at half-staff and the Olympic torch relay suspended.

Early assessments of the disaster's economic impact predicted that it would be "minimal," "transient" and "limited." Economists declared that this was a human tragedy, not an economic one.

But almost a week after the quake, vast swaths of companies are still shut down and millions of people are still not at back at work. There is evidence that all sorts of resources that China needs to continue fueling its double-digit growth -- including grains, hydroelectric power and chemicals -- are becoming more scarce and more expensive.

Energy, water and food supplies are particular concerns, as is the worry that continuing fear among Chinese workers could drive the most vulnerable aspect of the economy: inflation.

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