Chinese stood in silence and grief on Monday afternoon to mourn the tens of thousands of victims of the worst earthquake in decades, but their sorrows didn't shake their confidence in China's economy, said analysts.
The stock market opened sharply lower after the 8.0-magnitude quake on May 12, but the benchmark Shanghai Composite Index was down merely 0.6 percent in the following five trading days, closing at 3,604.76 points on Monday.
Securities analyst Ying Jianzhong attributed the unexpectedly stable performance of Chinese shares to the anticipation that the quake would not alter China's overall economic direction.
"The negative effect on the stock market is diminishing," said Ying.
He noted that as relief and recovery work started, demand for daily necessities, medicine, steel and cement had driven up companies in those sectors.
The quake would not shake overall confidence in the economy; therefore, the government would maintain its goals of preventing overheating and curbing inflation, economist Wang Xiaoguang told Xinhua in an interview on Monday.
"Unlike the Sept. 11 terrorist attack, the catastrophe has not aroused fears about the national economy, as it was a natural disaster caused by force majeure and limited to a small area," said Wang.
The People's Bank of China, the central bank, announced last Wednesday a move to provide 55 billion yuan (about 7.85 billion U.S. dollars) in refinancing for commercial banks and rural cooperatives in quake regions of Sichuan and Gansu, in order to increase their liquidity and ability to support disaster relief and reconstruction.
It also allowed banks in six cities that were hardest hit by the quake to temporarily keep their deposit reserve ratio at the prevailing level, while lenders in other regions must raise the ratio on Tuesday to curb excess liquidity.
"Those measures were just temporary support policies for disaster-hit regions and did not point to any changes in the government's tight monetary policy," said Wang.
China has controlled money supply to rein in rising prices and curbed loans to cool sizzling fixed-asset investment that drove the country's double-digit growth in gross domestic product (GDP).
Global investment banks have predicted a much smaller economic impact from the quake than from the snow storms in January and February.
The biggest loss caused by the quake was that of life and property, but it was not included in the calculation of GDP growth, said Wang.
The 8.0-magnitude quake that struck southwest China's Sichuan Province on May 12 had killed 34,073 and injured 245,108 others as of noon on Monday.
Losses were estimated at 67 billion yuan in the province, said Vice Minister of Industry and Information Xi Guohua at a press conference on Monday.
Meanwhile, Wang said post-disaster reconstruction could stimulate investment and boost GDP growth in the longer term.
The quake could cut annual national GDP growth by 0.2 percentage point due to slackened industrial output and consumption in the quake zone, CITIC Securities chief macro-economic analyst Zhu Jianfang estimated.
"Economic growth and company profits might suffer from the quake in the second quarter but resume normal performance in the third and fourth quarters, or even rebound sharply in some sectors," said Zhu.
(Xinhua News Agency May 20, 2008)