Japan’s earthquake sends shockwave through Chinese economy

Mar 15, 2011 12:00 AM

Japan's massive earthquake and tsunami have sent shockwaves through China's economy, though it is not yet possible to estimate the total loss, analysts said.
Trade between the two countries will definitely be affected in the short term, said an official with China's Ministry of Commerce.

In 2010, Japan was one of China's most important trade partners, accounting for about 8 % of China's total exports, while China sourced 13 % of its imports from Japan. The majority of trade between China and Japan was in vegetable and animal products, minerals, machinery and base metals, according to a report from Morgan Stanley Asia.
China ran the biggest trade surplus with Japan in textiles, and the biggest trade deficit in machinery and electrical equipment. Trade in machinery and electrical equipment was the main force behind growth in both exports to and imports from Japan, the report said.

Analysts believe that the quake's impact on bilateral trade will include petrochemical, electrical production, automobile, and agricultural industries.
"Take high-end petrochemical industries, for example. China mostly relies on importing petrochemical products from Japan, because, so far, China cannot independently produce these kinds of products. But the quake damaged Japan's infrastructures, including electric supplies and transportation systems, therefore lowering its production capacity of petrochemical products," said Liu Zhibiao, dean of east China's Jiangsu Provincial Academy of Social Sciences. "The price of petrochemical products will rise dramatically in a short period of time, and so we should be aware of that," Liu added.

The quake will also reduce Japan's domestic consumption ability, thus reducing Japan's imports from China, said Liu.
"Japan's imports of agriculture products and sea food products from China will fall," Liu said. "It will also affect China's processing industries. The seafood processing industries of east China's Shandong Province, for example."

Japanese companies in China
Japan is not only an important trading partner but also the fourth largest source of direct investment for China in 2010, accounting for 4 % of China's total FDI utilized, after Hong Kong, the Virgin Islands, and Singapore.
"Some Japanese manufacturing companies were damaged during the earthquake and stopped production, so it will take a while for them to resume operation. Therefore, the Chinese counterparts of the Japanese companies will be affected either by reduced sales in Japan's market or the hardship in stocking materials from Japan, etc.," said an official with China's Ministry of Commerce.

Ito Shiceo, director of the business division of Guangdong Nanhai Honda Automobile Parts Manufacturing said that, due to the suspension of production of its parent company in Japan, the parts manufacturing company in China can only ensure normal production until the end of March.

Besides trade and foreign direct investments, the most directly affected industry in China was tourism.
Most travel agencies in China halted tours to Japan after China's National Tourism Administration issued an emergency notice asking all travel agencies to ensure the safety of Chinese citizens on trip to Japan. The notice also required travel agencies to fully respect people's will to cancel their planned trips to Japan for safety concerns.

In east China's Jiangsu Province alone, all travel agencies have cancelled their tourist groups to Japan within the month. Customers either received refunds or had their travel plans delayed.
In Shanghai, the municipal tourist administration also issued orders for all tourist agencies to properly handle customers' requests to withdraw from trips. Due to safety concerns, most travel agencies nationwide suggested customers avoid Japan as an upcoming travel destination or delay existing plans pending further observations.

Despite the potential damages brought by the quake, hopes of an economic rebound remain.
According to a statement from Bank of East Asia, the post-quake reconstruction of Japan would stimulate the economy in the long run, while damage to the economy would be only a short term issue.

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