Massive quake rebuild holds key for China economy

By Simon Rabinovitch

ANXIAN, China (Reuters) -- In 80 seconds of shaking, China's devastating earthquake earlier this year cut a swathe of death and destruction through remote hilly towns.

In a recovery that will take years, the whole country's prosperity is at stake.

Quake reconstruction is a central plank of the government's stimulus plan for the ailing Chinese economy, set to take one-quarter of Beijing's promised 4 trillion yuan ($580 billion) spending boost and to create millions of sorely needed jobs.

Already, the disaster zone has been transformed into a vast, manic construction site, a trail of bricks, steel and cement coursing through its heart, those made homeless hammering away to reverse their fate and entrepreneurs from far-flung corners of the country attracted by the whiff of profit in calamity.

"I've been doing this job for about 20 years and I've never seen things so busy," said Zhao Renjun, bending steel girders into shape on a construction site in Anxian county, part of the huge area rocked by the May 12 earthquake that killed more than 80,000 people in China's southwest.

"I haven't had time to fix my own house. I've been so busy working for others," he said.

A partial list of needs includes 4.5 million homes, 51,000 kms (31,690 miles) of roads and 5,500 kms (3,418 miles) of railways -- enough to occupy at least some of the 20 million people who could lose jobs in China's once-humming export factories hit by the global slowdown.

The feverish activity inspires confidence about the financial muscle of the state and the vigor of the economy that it is trying to nurse back to health, but it also carries warning signs of the corruption, waste and unforeseen complications that are already dogging China's economic plans.

COMPLICATIONS

"Because everyone is building, prices for materials have shot up," said Liu Siyin, 34, taking a break from hauling buckets of cement on a shoulder pole at his quake-damaged home.

"We can't buy everything we need now and we might have to stop building for a while," he said. "We really wish the government could control prices."

Liu had just started laying bricks for the second-floor wall of his house up a treacherous mountain road.

Only half joking, he said fast-inflating material costs would neutralize his 50,000 yuan interest-free loan from the government for rebuilding. Bricks and cement from local vendors have trebled in price in just a few months.

Some local authorities, such as the city government in Mianyang, have vowed to crack down on price gouging.

However, a degree of price increases is exactly what the government wants. As with the stimulus package for the wider economy, Beijing is providing a huge pot of cash to kick off quake reconstruction but expects to lure private businesses into the fold, to have the investment momentum spread more widely.