The quake that shook southwest China was unlikely to have a major impact on the economy, experts said Tuesday.

The earthquake would only affect economic activity in limited areas and some local industries in the short term, said Feng Fei, deputy director of the Research Department of Industrial Economy at the Development Research Center of the State Council (cabinet).

He said it would have a much smaller influence on the economy than the winter storms that dragged down first-quarter economic growth and drove up prices.

"Similar problems to those of the snow storms may occur, but won't be so serious," said Feng.

Southwest Securities analyst Xie Xuecheng said the quake could worsen China's already high inflationary pressure. The consumer price index rose 8.5 percent year-on-year in April.

Since Sichuan is a major producer of grain and pigs, grain supply might be affected, while transportation constraints involving pigs might drive up national pork prices, said Xie.

"Marked price rises are unlikely as transportation to Sichuan was only partly affected," said Galaxy Securities analyst Li Feng.

Li's view was echoed by Feng Fei, who said the quake would not shake the general balance of supply and demand for major commodities and energy.

"Unlike what happened during the winter, not many large enterprises are located in the disaster-stricken areas," said Feng.

Sichuan is a major source of natural gas, but most of its natural gas fields -- like its pig farms -- are in its southern half, while the quake epicenter was located in the province's north.

The Ministry of Agriculture said Tuesday that agricultural losses from the quake "should not be underestimated" and it urged local officials to ensure supply and strengthen market monitoring of grains and fresh food.

The worst snow storm in 50 years in January and February contributed to a near 12-year high inflationary index of 8.7 percent in February.

It also served to pare the country's industrial profit increase by 27.3 percentage points and slow economic growth by 1.1 percentage points in the first quarter, compared with the same period last year.

"If businesses in the affected areas couldn't resume in a short period, that would be reflected in the local and national gross domestic product (GDP) figures," said Feng.

The quake would weaken China's second-quarter GDP growth, but the effect might be temporary and limited, said economist Sun Mingchun at the global investment bank Lehman Brothers.

Meanwhile, post-disaster construction was expected to stimulate domestic demand in the next few months, said Feng.

The government's tight monetary policy was expected to be further tested after the quake, facing high inflationary pressure and, at the same time, the need to loosen controls on bank credit during reconstruction.

"Though the specific losses are yet to be calculated, possibilities for interest rate hikes and the force of tight monetary policy would decrease within a short period," said chief economist Ha Jiming with the China International Capital Corporation (CICC).

However, the central bank might continue to raise the deposit reserve ratio for commercial banks, as curbing inflation remained the top economic priority, said the CICC economist Xing Ziqiang.

With investors feeling uncertain about the economic jolt, Chinese shares slumped on Tuesday, with the benchmark Shanghai Composite Index down 1.84 percent on Tuesday.

The capital market would see some immediate fluctuations, but the upward movement won't be reversed, said analysts.

Late on Tuesday afternoon, 23 out of 29 listed companies whose shares were suspended from trading in the morning due to the earthquake reported the disaster had no or limited impact on their operations.

The influence on insurance companies, especially life insurers, was yet to be seen as damages and casualties were yet to be conclusively calculated, said the CICC in a report.

The Sichuan earthquake, measuring 7.8 on the Richter scale on Monday, had taken more than 12,000 lives, according to vice governor of Sichuan Li Chengyun.

With a population of more than 80 million people, Sichuan saw its GDP value reaching 1.05 trillion yuan (US$150 billion) in 2007, up 14.9 percent year on year, above the national annual economic growth.

(Xinhua News Agency May 14, 2008)