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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. The largely mountainous inland province of Sichuan, where the quake hit, is not a manufacturing base, accounting for only 3.5 percent of China's gross industrial output. It is, however, an important grain and pork producer, and has China's largest reserves of natural gas. Its five largest cities -- including the provincial capital, Chengdu, about 55 miles from the epicenter -- escaped the large-scale devastation that killed so many in rural areas. Though the quake damage won't derail China's economy -- reconstruction projects will almost inevitably boost spending -- many economists agree that it is likely to make a noticeable dent in the growth of gross domestic product. Shen Minggao, a Citigroup analyst based in Beijing, said he is especially worried about energy. "We all know the government controls the price of water and electricity, but there could be a shortage," Shen said. The most critical global economic issue may be the quake's impact on oil prices. On Friday, crude jumped to almost $128 a barrel in New York on speculation that China, the world's second-largest consumer, after the United States, would have to increase imports because of energy shortfalls resulting from earthquake damage. Ten power stations in and around Sichuan were knocked out, according to the State Grid Corp. of China. And as of late last week, PetroChina Co. said it had resumed about one-third of its natural gas production in Sichuan. Dozens of its stations and 60 of its drilling rigs also stopped operations. Additionally, about 400 dams were damaged by the quake. All the roads around the Huaneng Group's Taipingyi hydroelectric plant collapsed, and 50 workers remained trapped. Over the weekend, the company's emergency coordinator, Wu Jianling, was negotiating with the military for assistance in airlifting the injured. He said he could not address the dam's structural damage or when the plant might produce power again. "Whether it's in danger of bursting, we just don't know. We haven't been able to personally check," Wu said. Domestically, whether China can control inflation in the aftermath of the crisis will be a key indicator in how the government is perceived. Keeping the price of basic foodstuffs stable is seen as critical to social stability. When the price of pork -- the country's meat staple -- began to soar last summer, the premier, Wen, made a high-profile television appearance, urging local officials to contain prices or risk upsetting the country's "harmonious society." Soaring inflation was one trigger of the 1989 Tiananmen Square protests, which were quashed by China's military. Sichuan province produces more than 11 percent of China's pork and is the heartland of the country's grain industry. With food prices already up 22 percent year over year because of other factors, Chinese officials last week announced the unusual measure of releasing tens of thousands of tons of grains and vegetable oil from national reserves. The current price for pork has not shifted much, said Citic Securities chief strategist Cheng Weiqing. "But I don't know how long that can last." In a research report, Lehman Brothers analyst Sun Mingchun wrote that although he did not expect significant disruption in agricultural production, the crisis could still "exacerbate panics on rice supply problems, given recent shortages in the global rice market." This, he said, "could cause rice prices to rise further." Also last week, shares of Hebei Taihang Cement Co. and Asia Cement Co. jumped in trading on expectations that demand for building materials for new homes and workplaces would bring higher prices. On Sunday in Shifang, two hours north of Chengdu, a skeleton crew of administrative employees at the Anda chemical plant was communicating with overseas customers and asking workers to report in on Monday. The factory had tried to open Thursday, but only 10 of its more than 130 workers showed up. "Everyone is taking a break. People are afraid. The plant needs a safety inspection," said Quan Shaohua, 56, an accountant. "Our initial thought was to get people out of the shadow of the earthquake quickly," explained Xiang Chaoan, factory director. But now, he said, that might have been too soon. If the plant is up and running this week, he said, he should be able to keep prices stable. But if it is only partially operational for a longer period, he might not be able to fulfill all his orders. Xiang, 44, said he has not returned to his house since the earthquake hit, preferring instead to sleep with his family on a tarp on the factory grounds where he feels safer. He knows intellectually that "living in my home should be okay," Xiang said. "But now the whole county is empty," he said. "You can't help but feel scared." Researchers Wu Meng and Crissie Ding contributed to this report. |
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