China Floods Kill 173, Cut Transportation Links; Hit to Economy Expected

July 11, 2016

Weeks of torrential rain across central and southern China have caused the country’s worst flooding since 1998, killing 173 people, ruining farms and cutting major transportation arteries — and creating potential headwinds to economy growth.

A swollen Yangtze and other rivers spilled over their banks as flood waters moved toward the coast. That was compounded by the arrival of Typhoon Nepartak, which was downgraded to tropical depression as it made landfall on Saturday in Fujian province.

The Ministry of Civil Affairs said flooding and rain associated with the typhoon affected more than 31 million people in 12 provinces, submerged more than 2.7 million hectares (6.7 million acres) of cropland and caused 67.1 billion yuan ($10 billion) in damages.

The death toll is still less than the 4,150 reported in 1998. Flooding both then and now was caused by heavy rain linked to El NiƱo, which originates from warm waters in the Pacific Ocean near the equator and disrupts global weather patterns.

Road, Rail

While forecasters said the worst weather passed on Monday, analysts said the economic impact from farm damage and transport disruptions would be tallied for months to come.

China’s National Development and Reform Commission said in a statement Sunday that fruit and vegetable prices had “risen significantly” in some flooded regions. It asked local authorities to “closely monitor prices” and implement price controls if needed.

Flooding will boost consumer prices in July and August by about 0.2 percentage point to levels above 2 percent, Zhou Jingtong, director of macroeconomic research at Bank of China Ltd. in Beijing, wrote in a note. The CPI rose 1.9 percent from a year earlier in June, less than a 2 percent gain in May, the National Bureau of Statistics said Sunday.

Economists said the floods would have both short- and long-term implications for the world’s second-largest economy. Food and product shortages could materialize soon from supply interruptions as transport hubs were paralyzed and factories and offices closed in some of China’s most industrialized provinces.

‘Negative Impact’

“The heavy rainfalls at present pose downside risks,” Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, wrote in a report Friday. “We expect some negative impact on third-quarter gross domestic product growth unless the government launches stimulus measures to offset the impact.”

Longer term rebuilding could prove to be a stimulus, according to Nomura Holdings Inc.

“The situation seems increasingly comparable to events in 1998,” Nomura economists wrote in a report. Repairs and rebuilding may boost growth in the fourth quarter “as post-flood construction may boost aggregate demand. We believe industrial production growth will likely rebound in September after a weak July and August.”

–With assistance from Miao Han.


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