7. Financial implications and risk
It is clear that individual earthquakes in China can have extremely high impacts: on safety and mortality, to buildings and installations, and even to the macro economy. Given an understanding of vulnerability then seismic risk can be considered in terms of the simple UNESCO generic equation

SEISMIC RISK = SEISMIC HAZARD x VULNERABILITY


in which the hazard term quantifies the likelihood of the earthquake phenomenon, and this can then be extended through to financial implications and dollar ($) or Yuan (¥) loss:

¥ RISK = HAZARD x VULNERABILITY x ¥ REPLACEMENT VALUE

China is well aware that ¥ RISK is measurable not only in terms of the cost of repair or replacement of damaged buildings, but also of damaged lifelines, lost investment, competitiveness and capacity, and reduced or diverted Gross Domestic Product (GDP). Such diversion has the potential to seriously inhibit sustained growth and development.

Detailed deterministic evaluations of expected losses due to earthquakes in China have been undertaken. Studies published in 1995 (RGCERP) provided estimates of losses to buildings, economic losses and mortalities expected during the next 10 years (up to 2005). For example figure 11 maps expected losses to buildings caused by intensity VIII strong ground shaking alone. The distribution in this map is geographically extensive and reaches to significant expected loss.

Figure 11. Map forecasting expected earthquake losses in the ten year period 1995 to before 2005 for buildings experiencing intensity VIII (map extract from 1:16,000,000 scale original of RGCERP, 1995). Block values are in terms of 10,000 Yuan.

Seismologists, earthquake engineers and other environmental scientists in China have taken these procedures much further and have investigated potential losses in relation to GDPs of local areas. In the previous section’s discussion of building vulnerability the V_index was introduced. It is conceptually easy to extend these ideas based in building vulnerability to a framework designed to investigate social wealth, although achievement of such a task requires extensive study. Chen et al. (1999) successfully extended building vulnerability concepts through to social wealth and used GDP as the fundamental index of social wealth and related potential losses. The local GDP takes account of total economic product spanning manufactured goods and service industry products in a region. Expected dollar ($) or Yuan (¥) loss can now be visualised as

¥ Loss = .X i=VI P(Ii) F(GDP.Ii) GDP

in which ¥ GDP is a regional economic product, F(GDP.Ii) is analogous to building vulnerability and estimates the proportion of damage to the ¥ GDP when intensity Ii occurs, and P(Ii) is the hazard or probability of that intensity. The losses are summed over all loss producing intensities or degrees of strong ground shaking. Expected losses on a region by region basis incurred over a 50 year period are shown in figure 12a in relation to ¥ GDP, as proportional regional losses in pie-chart figure 12b and with further detail in Table 4. The five provinces of Sichuan, Yunnan, Jiangsu, Liaoning and Hebei alone may together suffer over half (55.2%) of the total losses expected in China during the next 50 years. The distribution of ¥ Losses in relation to ¥ GDPs is also an issue of concern. The heaviest losses of all are forecast for Sichuan (including Chongqing city) and Yunnan provinces in western China – and these losses considerably exceed respective regional ¥ GDP, a situation that can greatly impede growth and development. High ¥ GDP earners and contributors to China’s social wealth in Jiangsu, Liaoning, Hebei and Guangdong are also greatly exposed. Such contrasting ¥ Loss and earnings ¥ GDP indicates that mitigation strategies are a major and complex issue for long term sustainable growth.

In addition to this demography of Chen et al. for communities throughout China, there is the inexorable rise of the mega-city, which, in China has been a result of recent large scale economic and demographic change. Rapid modernisation of towns and cities has resulted in urbanisation on a massive scale. Shanghai is a clear example of a transformed city and is China’s leading economic and business centre. Although it is not considered to be in an area of high seismic hazard there is an important economic, political and insurance need to estimate possible potential losses in this city alone, and for this to be undertaken thoroughly requires detailed knowledge and investigation. Figure 13 shows the estimated building losses for a section of Nanjing Road, Shanghai for an earthquake of intensity VII. The mean damage to a building type at a given intensity is described in a series of damage states and associated probabilities. These are tabulated in damage probability matrices. As an example, in this district of Shanghai almost eight per cent of damage to old civil houses will result in total collapse state D5, for even an intensity VII earthquake.

Figure 12. Expected losses and GDP for the main cities and provinces in China: (a) histogram of expected loss due to earthquake during 50 years (corresponding regional GDP indicated by empty circle) and (b) piechart illustrating relative regional loss due to earthquake during 50 years.

Table 4. Cities and counties with average expected loss due to earthquake greater than ¥ 50,000,000 in the next 50 years (adapted from Chen et al., 1999, rounded to ¥ 1,000,000)

Figure 13. Estimation of potential building losses at varying damage grades or states D1 to D5 for Nanjing Road, Shanghai for an earthquake intensity of VII.

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