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China earthquake to have only limited impact on economy - Merrill Lynch

Beijing: The earthquake in Sichuan province yesterday should have less of an impact on China's economy than the snowstorms that struck a much larger area of the country in January and February, particularly in terms of inflation, exports and industrial production, Merrill Lynch said.
'The earthquake should have a much smaller impact on China's economy than the snowstorm happened earlier this year. The earthquake affected less area in China, and the disaster itself has a short time span,' Merrill Lynch economist Lu Ting said in a note.
The snowstorm earlier this year paralyzed much of the national transport system, including some of its most important highways and railways, Lu said.
The economist noted that Sichuan province, where the 7.8 magnitude earthquake struck, makes up 3.9 pct of China's GDP and its manufacturing output is only about 2.5 pct of the national total.
'As an inland province, Sichuan is not relevant for China's external trade, so we don't think China's exports and imports will be noticeably affected by the earthquake,' Merrill Lynch said.
'We also see little impact on China's currency because the earthquake took place in regions almost negligible for China's external trade. This is quite different from the snowstorm which affected both Pearl and Yangtze River deltas,' it said.
However, the earthquake may fuel inflationary expectations in some parts of the country due to possible supply shortages, although agricultural production should be little impacted, Lu said. [13/5/08]

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