Deadly flooding in China has caused billions of yuan in financial losses and a slowdown in industrial production — but possible government spending on repairs could see manufacturing bounce back soon.
Flooding in the Yangtze River basin and northeastern China last month was the worst since 1998 and left a US$33 billion (HK$256 billion) economic toll on the country, according to a catastrophe report released by London-based insurance broker Aon on Thursday. Just two per cent of the damage was covered by insurance, Aon said.
The flooding, which left an estimated 764 people dead or missing, according to the Ministry of Civil Affairs, forced China’s official July manufacturing purchasing managers index to slip unexpectedly to 49.9 from 50.0 the month earlier, the first time since March that the threshold has dipped below 50 into contraction.
We expect the impact of the flooding on industrial production and investment to be temporary, and forecast a rebound later in the year on repairs and upgrades to flood-damaged infrastructure
But Standard Chartered Bank economist Betty Rui Wang says the impact of the flooding on production in the manufacturing sector was likely to bounce back from September, although it remains difficult to pinpoint exactly to what level.
“We expect the impact of the flooding on industrial production and investment to be temporary, and forecast a rebound later in the year on repairs and upgrades to flood-damaged infrastructure,” she said.
The government is responsible for repairs or upgrades of infrastructure, and has already been promoting repairs of underground pipes and water systems around China, including in Tianjin and Beijing, Wang told South China Morning Post.
“We do see a need or demand for this kind of infrastructure upgrade, even in the medium term.”
