Analysts warned today that the earthquake could unravel the Chinese government’s recent efforts to rein in bank lending and cool inflation – regional banks in the affected areas are now expected to be granted immunity from the recently imposed curbs on lending as firms race to rebuild.

Jun Ma, of Deutsche Bank said that the overall economic impact of the quake would be limited because the epicenter is in a mountainous region and has little in the way of heavy industry or even significant agriculture.

But because of damage to roads and other transport facilities, there could be shortages of food and consumer prices are now liable to rocket further. Construction material prices are also expected to soar.

Glen Maguire, Chief Asia Economist at Societe Generale said that the earthquake looks set to further exacerbate short-term food supply shortages – one of the key drivers of Chinese inflation and part of the reason, he said, that the Chinese authorities cannot yet claim to have inflation under control.

“The short term impact is going to be inflationary, but in the medium term these terrible natural disasters tend to be positive for growth given the rebuild of infrastructure. On a regional basis, you will see a relaxation of the recent edicts on bank lending.”

Analysts have already begun to tease out which sectors are most likely to gain or suffer from the quake. Hong-Kong-listed Sichuan Expressway, is expected to endure weeks or even months of dramatically lowered revenues because of lower traffic levels on it toll-charging expressways and the obligation to allow rescue and emergency vehicles to travel for free.

China Telecom is expected to be hadly hit, because the quake has affected around 10 per cent of its fixed line network. China mobile could also take a substantial hit. Sinopec has a giant gas project under development in the Sichuan area, which was to have accounted for about 7% of the companies revenues in two years time.

The building materials plays Shui On Cement and Anhui Conch, however, are being tipped for stronger sales as the massive rebuilding effort begins.

Anhui Conch, China's largest cement maker, was up 5.5 per cent and Huaxin Cement, a subsidiary of Lafarge, the world's biggest cement maker, jumped by the 10 per cent daily limit today.

But most Chinese stocks fell sharply with the CSI 300 Index, which tracks stocks traded in Shanghai and Shenzhen, down 2.3 per cent in early afternoon trading, its biggest one-day fall for a week.

An estimated 66 stocks based in the affected region were suspended as China's exchanges await companies to disclose the impact of the disaster on their operations.

The benchmark Shanghai Composite Index ended the morning down 93.43 points or 2.58 pct at 3,533.55.

However gains in cement and steel makers, expected to benefit from the Sichuan province's reconstruction, helped drive stocks in Hong Kong higher. The Hang Seng index ended the morning up 174.08 points or 0.69 per cent at 25,237.25.

Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank, warned: "There will be knock-on effects from the quake. There will be infrastructure constraints."

However, Zhang Gang, an analyst at Central China Securities, predicted the earthquake will have only limited impact on China's economy.

'It is inflation concerns that continued to weigh on the market," Mr Zhang said.

Ting Lu and TJ Bond, economist with Merrill Lynch in Hong Kong, said in a note: "We expect the earthquake to further fuel inflationary expectations in some parts of China due to possible supply shortages as a result of disruption in transportation.”

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