Over the last 24 hours I have been asked to give my thoughts about the impact of the quake on China’s economy, and too be honest I was working to much on emailing friends in the area to worry about it.

Now, that I have a bit of downtime though, I think that it is important to address the fact that there will be a long term impact on the area and there are a few things that should be said.

First, the hardest hit areas have historically developed slower from an economical perspective as they lacked the natural export markets that the cities on the east coast have.  However, the area of Mianyang is a major city of Sichuan, and the role of this area to the southwest market was becoming more important.

So, from a manufacturing perspective I do not see many industries that will see a significant impact at the 1st and 2nd tier, however where we will need to wait and see will be on the raw material front.  this is a resource rich area, and it is possible that this catastrophe will hinder  some supply lines.

Second, great expense and resources will go into the rescue efforts, clean up, and rebuilding, and this and that means that resources will be diverted.  energy, gas, trucks, rail, etc. will all be diverted to support the efforts, and that may mean some disruptions in the middle of the country.. some on the east coast.

Third, from an agricultural perspective, Sichuan is an important producer of agricultural products, particularly pork, and depending on the severity of the damage to farms inflationary pressure may increase.

Fourth, as we saw from the fact that many Sichuan stocks were halted and the exchange itself fell, there could be some mid term impact on the exchange and the stocks traded on it (insurance stocks) that occurs.

Over the next few weeks, as the debris is cleared and the damage assessed, a clearer picture will come forward.   for me, I am going to be focused on working with agencies I know in the area to do what I can, but I think it is important that investors in China understand what the potential ripples are.

As we saw just a few months ago, the Chinese government can quickly mobilize and recover from major catastropies and I wish them all the best in their efforts.  If your firm is a steel manufacturer, medical equipment group, pharmaceutical I urge you to follow the situation closely and work with governments and NGOs in the area to assess and address the needs.

If I hear of anything that I think is urgent from the business side, I will be sure to pass it along, but I am confident that the economic impact will be less than the recent snow storms.

A few months back I met with Dan Inman to discuss what I had been seeing in my time in China, related to China’s 2nd and 3rd tier growth, and this week his article was released on CNBC’s European Edition.

Trading Places take a mixed approach of looking at the macro picture and then bringing in the thoughts of people on the ground, and I would suggest readers who are interested in China’s 2nd and 3rd tier to take 5 minutes to read through it.

Besides myself, the perspectives from a number of others have been included to give the article a nice flavor of the opportunities and challenges that face foreign investors when looking at this environment.

In addition to this article, CNBC also highlights a few others that they have written
How Agile Is China?; Chinese Cities Beyond Beijing. Welcome to the 10 Chinese cities that are now coming of age; Chinese Brands The Chinese companies not to be missed in 2008; China Opener - Introducing the world’s next superpower

For those interested in my writing on China’s 2nd tier, you can see the profiles I have written here

1. Southwest China’s unique national grain exchange center settled in Chengdu
Recently, the State Grain Administration gave the official reply to approve Sichuan to organize Chengdu National Grain Exchange Center, which is the only state-level information platform for grain exchange in Yunnan, Guizhou, Sichuan, Chongqing and Tibet, five provinces and municipality in southwest China.

2. Chengdu’s investment environment for commercial property rated best in China
It was learned on April 4 from Sichuan Commercial Chains Association, at the newly concluded “2008 China Commercial Property Industry Annual Meeting” were disclosed the city of best investment environment for commercial property and region of biggest investment potential of China in 2008, and Chengdu stood out among its peers and was recommended by the jury as the “2008 Best City of Investment Environment for Commercial Property in China”.

3.Eight provinces and cities including Sichuan signed agreements of 25 billion yuan to push east-west inter-provincial exchanges
The Inter-provincial Economic & Cooperative Exchange Conference co-sponsored by Beijing, Tianjing, Shanxi, Gansu, etc., eight eastern and western provinces and cities, was held in Xi’an on April 6. Over 800 government and company representatives of the above regions have participated in the event, and 40 economic cooperation projects between the East and West have been signed, amounting to over 25 billion yuan.

4. In 2008 Sichuan has 267,800 college graduates, with 48% post-graduates having signed contracts
It was learned on April 8 from Sichuan Provincial Department of Education, by the end of March, 116,400 graduates from the province’s high learning institutions have signed employment contracts, with a rate of 43.47%, up 2% year-on-year, of which, signed post-graduates count 8,159, being 48.08% of the total, undergraduates 45,600, 39.69%, and vocational school graduates 62,600, 46.10%.

It is reported that there are 267,800 students graduated from 83 higher education establishments in Sichuan this year, an increase of 30,000 over last year, growing by 13%.

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1. Nippon Paint Chengdu Production Base formally opened and put into production
On March 28, Nippon Paint (Chengdu) Co. Ltd and its production base subordinate to Nippon Group, a world-famous paint company, was officially opened and put into production at the Chengdu Economic and Technological Development Zone. It is reported that the Chengdu base invested by Singaporean Lishi Personal Co. Ltd and a Japanese paint company with 23 million US dollars has become the first branch factory of Nippon Paint in Southwest China.

2. AMD set up Chengdu branch, westward expansion of market layout in China
The kickoff of the Sixth Chengdu International Computer Festival and the opening ceremony of AMD Chengdu Branch were held on March 29 in Chengdu, during which AMD formally announced the establishment of Chengdu filiale and also its putting into services, which is another measure of AMD Corporation after has settled its Great China headquarters in Beijing, invested in the CPU package test plant in Shuzhou and set up a R&D center in Shanghai, signifying the gradual perfection of its market layout in China.

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1. 600-million-yuan amorphous silicon project settled in Chongzhou
The amorphous silicon solar hull cell project worth 600 million yuan will be put into construction this July at Chongzhou Industrial Development Zone, the reporter learned on February 26. Its main investor is Sichuan Guangliang Investment Co. LTD subordinate to Sichuan Kaimai Group. It is introduced that the company will complete the building of the first production line within a year and of all the construction items within 30 months. The annual capacity of amorphous silicon solar hull cell will reach 300 megawatt by then, biggest in China, with 45 million yuan taxes to be paid annually.

2. Chengdu Qingyang district was selected as national demonstration zone of education
It was learned on February 26 from the Ministry of Education, the state has designated 114 national pilot zones of community education in 4 patches since 2001. Recently, 34 of them were recognized as national demonstration zones of community education including Beijing Xicheng district, Haidian district and Chengdu Qingyang district.

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With a couple weeks off for the Chinese New Year, the City of Chengdu has wasted no time in getting back into the news room to produce another newsletter… and as it turns out, they have good reason to.

1. Chengdu Ranked No. 2 in China
The large television activity “Top Chinese Cities’ most valuable cities to be introduced to the world”, jointly launched by CCTV, the United Nations World Tourism Organization, the United Nations Development Programme and other agencies, as well as the National Geographic Channel and other more than 100 common authority media at home and abroad, held its annual Festival in the Beijing Exhibition Hall on January 31 and announced to the world 10 Chinese cities most valuable to be introduced to the world, including Hangzhou, Chengdu, Dalian which ranked in the top three.

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Hilton Hotel is coming
The world’s top-level five-star business hotel – Hilton Hotel was formally settled in Chengdu Hilton International Square. It is reported that it will be the sixth Hilton Hotel in China. The Hilton International Square project whose construction will be started in August, has a total investment of 2 billion yuan and is planned and designed by ATKINS Co., chef designer of a seven-star sail-shaped hotel in Dubai, and is estimated to be finished in 2010 – 2012. At that time, Chengdu’s five-star hotels will rise to 12, ranking first in number in West China.

The Public Services in Chengdu Catches up with that in Beijing and Shanghai

On January 8, the Third China International Symposium on Evaluation of Public Services was held in Chengdu. At the meeting, according to the “2007 Public Evaluation Index to China’s Public Services” released by the authority investigation agency Lingdian Advisory Group, statistics from more than 3,000 copies of questionnaire show that among seven big cities Shanghai, Beijing, Shenyang, Wuhan, Guangzhou, Chengdu, and Xi’an, the Public Security Indicators of Chengdu listed only next to Shanghai but before Beijing.
It is learned that the public services indexes include nine different fields closely related to the people’s livelihood such as public security, public transportation, public use, medical treatment and sanitation, social security, basic education, employment services, environmental sanitation and control, and agriculture services.

Chengdu’s software industry predicted to generate more than 30 billion yuan
It was learned from the “2007 annual meeting for Chengdu Software Industry Statistics” held recently, the city’s software industry has realized accumulated revenue of 26.082 billion yuan from January to November last year, up 46.52% year-on-year; of which 109 million US dollars for exports. More specifically, 9.298 billion yuan was from software products, 2.381 billion yuan from system integration and 8.638 billion yuan from software services, taking respectively 35.65%, 9.13% and 33.12% of the total income. The whole year industry revenue is predicted to surpass 30 billion yuan.

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