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Natural disasters are the effects which are caused by natural changes in the Earth resulting in greater loss or damage to the lives of people and environment. The impacts of natural disasters currently show that is the major hindering of the economic growth in the World. The process of reconstruction after the damage caused by the natural disaster is cost fully and sometime it is unrenewable, like death of people. Also people looking for survive and no more production in the affected area. These effects cause great impacts in the global economy on the World.
The aim of this report is to evaluate the effect of natural disaster, such as Japan Earthquake and Sichuan Earthquake on global economy on the World. The disaster causes an economic growth to slow by destructing the major industries and productive areas in Japan and China. But, the report shows that, the Japan’s Earthquake causes largest economic impacts on the World scale than Sichuan Earthquake.
This report focuses on global economic impacts on the World caused by these Earthquakes. The major areas affected are industries, export and import trading, oil sector and agriculture sector.
2.0. JAPAN EARTHQUAKE
The Japan Earthquake occurred on March 11, 2011. It measured 8.9 on the Richter scale, and it is the biggest country earthquake and seventh largest on record since began (smh.com.au, march 11, 2011).The major areas affected are Sendai, Ichihara, Fukushima, Onagawa, Ofunato, and Kesennuma.This phenomena causes negative impacts on global economy. Furthermore, it depresses the production from the factories and cause derails on global economy.
2.2. Global Economic Impacts
2.2.1. Death of people
People are the main source of labour in the World. This research shows that, about 7,300 people are confirmed dead and nearly 11,000 missing (Sawer, P& Cooper 2011). Labour force are important for increasing production in a country, Meanwhile; after this catastrophe, people looking for surviving and no more production of goods made in Industries, Therefore, causes the country to contribute less demand of product global and disrupt other Industries in the World which depend on importation of manufactured goods from Japan. For example Japan exports spare part of cars and semiconductor to USA (Beckman, K 2011).
2.2.2. Damage of Infrastructure
Infrastructure is the important for the National development globally and domestically. The damage made on infrastructure is quite make difficulties on growth of economy. The time it takes for infrastructure to rebuild after the effect of earthquake take several days and needs more money. Although the area damaged covers small part in Northern Japan, but it is unavoidable disrupting the economy, because it cause some companies to suspend their services from northern and eastern part of Japan, like delivery company Boeing’s 787 Dreamliner (Xu, S 2011).This damage of Infrastructure causes the decrease of GDP and stopping or delaying in the contributing in the global development projects.
2.2.3. Damage on Nuclear Reactor
Due to closing of the nuclear reactors, which is the main source of power, the economic effect due to this disaster is expected to be huge because many Industries are depending on it. After this disaster, Japan closes their steel mills Industries which are causes the increase of the price of steel in the World and reducing the consumption of iron ore in large amount (Oliver, S 2011). Japan’s strongest earthquake raises global demand for natural gas, coal and oil products in order to replace the power generated by the closed damaged nuclear reactors (Beckman 2011). Therefore, the disaster shocks the global market.
2.2.4. Export and Import Trade
Import and export of goods from Japan and other countries are rarely decreased due to this disaster. China imports metal, and auto parts and electronics from Japan and exports crude oil, and coal to Japan. But due to disruption of economy caused by this earthquake, Japan reduced the order of commodities from other countries. This circumstance affects the International business on global market.
2.2.5. Fall in Gross Domestic Product (GDP)
Japan’s earthquake steep declined Japan’s economy. The GDP fell by 8.6 per cent. This falling may cause greater negative impact on trade with other countries. Japan runs many projects worldwide to support other countries in development. For example; JICA money to support India-Project may be delayed due to fall in GDP (Panda, R 2011). Delaying on the completion of project on time gives back the growth of economy in the World.
2.2.6. Closing of Factories.
The major factories which affected are Toyota Motor Corporation, Nissan Motor Co, Cosmo Oil Co (oil refinery), Fuji Heavy Industries Ltd (Maker of Subaru cars and aircraft), Mitsui Mining and Smelting Co (zinc smelter), Panasonic Corp (producing audio products and digital cameras), Tokyo Electric Power Co (nuclear plant automatically shut), and Tokyo Gas Co. These are the giant companies on the World for delivering output in the World. Example, Toyota produces 420,000 of small cars for export per annually. (Webb, T 2011). Therefore, the products in the global market were decreased and have been more affected by this earthquake.
3.0. SICHUAN EARTHQUAKE
This quake occurred on 12 May 2008. The main cities affected are Beichuan, Dujiangyan, Shifang, Mianzhu, Juyuan, Jiangyou, Miangyang, Chengdu, Qionglai and Deyang (Tu, J 2008). The earthquake measured 7.8 on the Richter scale and enclosed largely to the mountainous areas of Sichuan province, leaving the important area for industrial centers undamaged (Chan, J 2008). Sichuan province contributes about 4% of the total China Gross Domestic Product (GDP) and only contributes 2.5 % of China’s manufacturing product. (Chan, J 2008).Therefore, the Sichuan earthquake contribute a small relative impacts on global economy on the World.
3.2. Global Economic Impacts
3.2.1 Industries Closed
The number of Industries closed was about 14,207. This effect deteriorated production of the country’s economy. China is one of the major producers of agriculture equipment on the World. (Chan, J 2008). Thus, this earthquake disaster is lowering the global economy on agriculture sector from countries which import agriculture machine from China.
The Sichuan is the common regions for hydropower generation in China (Chan, J 2008). The hydropower situated in Sichuan province were cut off to produce the power to the national grid, this causing some Industries to close its operation due to shorted of power and hence the GDP slow down. The exportation of commodities produced by these Industries was not sufficient to meet the demand of the world.
3.2.3 Industries Labour
Sichuan province is a largest provider of the cheap labour force; it provides about 20 million migrant labours to the rest of the regions of China (Chan, J 2008). These numbers of migrant labours, if they turn back to their home in order to increase the effort in reconstruction of the area which was damaged by the earthquake, it will increase labours deficit in other parts in China. This situation, will increase the pressure for wage payment and retarding the China economy and the World economy in general.
3.2.4 Price of the Commodities
The Sichuan disaster causes the rise of global prices of commodities. Crude oil prices in United States went beyond $130 per barrel after the effect of the earthquake, this is due to China is the second world’s largest consumer of oil, Japan is also affected by this earthquake; it imports 90% of metallic silicon, a material used to make semiconductors and solar cells. Most of the silicon comes from Sichuan province. The price rose from the pre-quake level of $US2,300 per ton to $2,500. And it is possible the price could rise to $3,000 due to shortages of commodity (Chan, J 2008).
3.2.5 Energy Infrastructure
The Sichuan Province is reach in hydro power, coal and natural gases production, it produce 71.2% of hydropower, 27.3% of coal, and 1.5% of natural gases (Fogarty M, 2011). The damage of energy infrastructure during the earthquake is likely holding back the enthusiasm of energy production. Decrease in production of energy causes the industries to slow up the production of goods. This causes them to affect the global economy
The Japan Earthquake causes greater global economic impacts compared to the Sichuan Earthquake. The Sichuan Earthquake contributes only 4.2 of the GDP of the China and causing the falling of 0.2 % of the economy growth in China. The Japan Earthquake hit the major area for industries; like Automakers Industries, Fuji heavy Industry, Sony, Nuclear reactors, which is the main source of power in many giant Industries, which result many industries to be closed, thus no production made. Also, this Earthquake causes a loss of $US 100 billion. This earthquake causes the oil price to fall by 3% because Japan stops importing oil from other countries and is the one of the World’s largest importers of oil.Lastly, the earthquake decline in orders of coal, iron ore from Australia, which is the second largest trading partner. Therefore, Japan Earthquake has greater global economic effect than Sichuan Earthquake in China.
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