By Alison Leung and Fang Yan HONG KONG/SHANGHAI, June 12 (Reuters) - Asked how China's most destructive earthquake in three decades would affect his firm, Ma Chunji paused, then chose his words carefully. "It's a sad thing," said the head of Sinotruk <3808.HK>, the country's top truck manufacturer. "But it will stimulate demand." "Beijing planned originally to re-adjust the speed of growth and compress the size of infrastructure projects and that would have affected us. Now we face a positive." As China rebuilds quake-hit Sichuan province -- where nearly 90,000 are feared dead or missing and 5 million were left homeless -- investors and executives alike ask the awkward but natural question of who will join an estimated $78 billion reconstruction that has drawn comparisons to Katrina and Kobe. Some analysts are playing down the economic impact of that effort, noting that the stricken area was a largely mountainous, rural area of Sichuan, while the whole province -- far from China's more developed coastal regions -- yields little more than 4 percent of the country's GDP. But many say investors should not overlook the sheer volume of spending, which could extend far beyond the damaged region to include an upgrade of infrastructure across the world's fourth-largest economy. "In the short term, there're all kinds of catalysts," said UBS strategist Hubert Tang. "But in the long run, if you look at a two- to three-year perspective, manufacturers have products exposed to the reconstruction theme." "Just look at the pure amount of money to be spent." FROM TELECOMS TO TRUCKS Apart from obvious beneficiaries in cement and infrastructure -- a boost for the likes of Anhui Conch <0914.HK> and Maanshan Iron and Steel <0323.HK> -- also touted are telecoms gear providers such as ZTE Corp <0763.HK> and vehicle makers such as Sinotruk. China has sketched out a blueprint for rebuilding that spans hospitals and roads to power grids and telecoms. [ID:nPEK275167] Deutsche Bank's chief economist for greater China, Jun Ma, estimates the effort will require 539 billion yuan ($78 billion) over three years, about 28 percent of that on new housing alone. That's about half the 16.3 trillion yen ($155 billion) spent in Kobe, Japan, an industrial area as opposed to less built-up Sichuan, after its 1995 quake. But some analysts are more upbeat on the spending outlook. "I believe that the reconstruction spending figures will be on the high side, perhaps far higher than this," said Donald Straszheim, vice chairman of Roth Capital Partners, LLC. "In most countries, the authorities usually decide that the right thing to do for the future is not to just reconstruct in the old way, but to upgrade, expand and build for growth, not just to replace with the old technology. I am certain that will be the dominant mentality in Sichuan province and in Beijing." Telecommunications is one area that may be poised for a push to new technology, spurred by the response to the quake. "Traditional communication systems have been seriously damaged in the earthquake, making us rethink the whole communications system," said Fok Tung Ling, chairman of wireless equipment vendor Comba <2342.HK>. Xi Guohua, a senior industry regulator, said China is working on "combining the sky and earth": building a wireless system with optical cable, and augmenting that with digital microwave or satellite communications. "Currently this is an emergency measure for Sichuan," Comba's Fok said of the plan. "But this is definitely a trend for the country in future." STOUTER CONSTRUCTION A nationwide outcry over rickety school buildings that collapsed during the May 12 quake has also spurred Beijing to order nationwide safety checks on schools and could lead to wider rebuilding, as well as the enforcement of tighter construction rules across China, propping up demand for steel and cement. "Beijing is expected to impose stricter construction standards nationwide," Anhui Conch Executive Director Guo Jingbin told Reuters. "We've seen that old buildings and roads cannot survive a major tremor." Although shares in Conch, China's top cement maker, and other materials and infrastructure companies such as China Communications Construction Corp <1800.HK> surged in the weeks after the quake, many analysts dismissed the rally as speculative and share prices are now back around pre-quake levels. (For a FACTBOX on share price moves please click [ID:nHKG153393]) Some analysts have argued reconstruction spending will not be enough to make a significant impact on companies' bottom lines, while price controls in the afflicted area, aimed at bolstering the rebuilding effort, limit profits. "Reconstruction could boost sales but not necessarily earnings as the companies involved may be asked to cap the price of their products," said Zhang Yong with Haitong Securities. Others noted, however, that even with price caps in Sichuan, the rebuilding effort could tighten supplies of materials from glass to cement to steel across China's fast-growing economy. "Manufacturers in other provinces might benefit from tight demand," UBS's Tang said. "Prices might be stable (in Sichuan) but may increase in other regions. They could benefit indirectly." Some firms are already bracing for a demand surge. Sinotruk, which has received government orders for more than 1,000 trucks, plans to boost capacity a third in 2009. [ID:nHKG163940] Conch plans three new plants in Sichuan with a total capacity of 12 million tonnes a year by 2010. [ID:nHKG353188] Construction equipment makers also expect a pickup in business. "It would definitely boost demand for our products. But it is hard for me to say whether that will help lift our sales by 5 percent or 10 percent," Wang Taiping, planning head for Guangxi Liugong Machinery Co Ltd <000528.SZ>, a construction equipment maker, told Reuters. ($1=6.937 Yuan) ($1=105.14 Yen) (Additional reporting by Judy Hua and Edwin Chan; Editing by Edwin Chan and Edmund Klamann)
Police and soldiers guard the entrance to the earthquake-destroyed Juyuan Middle school in Juyuan, Sichuan province June 4, 2008. At least two of the main reported schools that were open and ...
