So you’re about ready to buy some Chinese real estate.

Or ink out a contract.

Or invest in the stock market.

But you’ve got the jitters because you’re nervous about how the economy will fare post Olympics. Now, you’ve got one more worry: Olympics-related terrorism.

Would a terrorist attack likely threaten China’s business environment just like inflation, labor contract law implications, or a bear market?

Nope.

An article by Robert Shapiro, an undersecretary of commerce in the Clinton administration, has suggested that Al-Qaida has had minimal impact on the U.S. economy.

Using his logic, you can deduce that Muslim extremists that have threatened to attack Olympic venues may unfortunately and horrendously hurt people, but they won’t hurt business-as-usual overall.

“In the few places where terrorist activity has been pervasive and protracted—Colombia, Northern Ireland, the Basque region of Spain, and Israel—it depresses growth and sometimes stunts development,” Mr. Shapiro suggested. “Where terrorism has been more occasional and local, the economic impact is modest, resembling ordinary crime.”

Airliners just can’t derail large, advanced economies, he noted.

Well what about those September 11, 2001 attacks on the World Trade Center? What happened to the U.S. economy?

“The World Trade Center attack did not move the U.S. economy, as consumer spending and GDP accelerated strongly in the quarter immediately following the attack,” Mr. Shapiro noted. “Modern economies regularly absorb greater losses from bad weather and natural disasters—for example, the 1988 heat wave that took the lives of more than 5,000 Americans or the 1999 earthquake in Izmit, Turkey, that killed 17,000—without derailing.”

China has witnessed robust economic growth despite recent natural disasters. And artificial disasters – so long as they don’t involve weapons on a nuclear level – can’t amount to the earthquake toll.

Nonetheless, certain sectors of the economy could be affected, particularly in areas in which a attack is precipitated.

In Manhattan in 2001, Mr. Shapiro noted, terrorists destroyed almost 30 percent of Class A real estate. Airlines, hotels and insurance industries also experienced setbacks.

Clearly, attacks could get worse – nuclear, for instance. But even then, large economies wouldn’t fare much worse.

“Scenarios for a [U.S] terrorist attack on a nuclear power plant speculate that as many as 50,000 people could die and property losses could reach $350 billion,” Mr. Shapiro noted. “Even such horrifying losses would equal just 3 percent of the GDP and be limited to one region. What disrupts an economy like ours are not local shocks like a terrorist act but shocks that hit all our markets, as when OPEC tripled the price of energy.”

Although a historic terrorist event may be even more memorable than a terrible natural disaster, it’s economic impact is minimal – something akin to the impact of violent crime, Mr. Shapiro noted.

“Like terrorism, violent crime is a localized phenomenon, often concentrated in low-income urban areas,” Mr. Shapiro wrote. “And the economic response looks very similar: Outside investment flees high-crime neighborhoods, slowing growth and job creation there, for safer locales.”

Ironically, what could impact the Chinese economy drastically is not terrorism itself, but Beijing’s response to terrorism. If a government viewed an attack as an act of war, and went to war, then that, according to Mr. Shapiro, “entails very large economic costs and effects.”

Still, don’t imagine China will be invading Afghanistan anytime soon.

Olympics threats have come from an Uighur Muslim separatist organization pushing for independence for China’s far western region of Xinjiang.

    Channel: Vital News     |