Naturally China has a reason to feel confident of fulfilling the target in three years. A rising national strength and outpouring of donations are helping with the process.

By June 2, the country had received 41.74 billion yuan ($5.96 billion) in cash and relief materials from donors at home and abroad.

China's buoyant economy will prop up the healing of the disaster pain, said Zhuang. The Chinese Government's positive attitude toward international aid also facilitates the reconstruction drive, Zhuang added.

Financial aid

The Chinese Government has also offered a handful of fiscal aid packages. Seventy billion yuan ($10 billion) of public finance was earmarked in aid. National reserves were employed to supply oil and grain for disaster-hit areas. And food subsidies will also be offered to 10 million victims for three months.

In another move, the Ministry of Finance and the State Administration of Taxation also softened their lines, including freeing damaged enterprise assets from taxation and trimming personal income tax for disaster victims.

With regard to monetary policy, the People's Bank of China, the central bank, decided to shelve the upward revision of reserve requirement ratio for commercial banks in the disaster-racked areas, which should have come into effect as of May 20. The central bank also relaxed refinancing and rediscount quotas of the banking sector in Sichuan with a view to pouring liquidity into the province.

According to statistics from the China Banking Regulatory Commission, by May 21, the country's banks had extended 6.5 billion yuan ($930 million) of total loans to the disaster-stricken areas, and are set to reach credit agreements with those areas worth 82.66 billion yuan ($11.81 billion).

Catering to reconstruction projects hungry for cash, the central bank will have to reshape its credit policies. Multiple monetary instruments will be flexibly deployed to shore up the rebuilding drive, said central bank Governor Zhou Xiaochuan on a visit to Dujiangyan.

The People's Bank of China and China Banking Regulatory Commission had already ordered not to press the debtors in disaster-hit areas for mortgage payments, not fine those who default on their payments, or register records of bad conduct. This move was echoed by major banks across the country.

Zhang Yun, Vice President of the Agricultural Bank of China told the International Finance News that the bank will stretch the loan terms for mortgaged houses ravaged by the quake in Sichuan. Its credit card customers will also be allowed more time to repay.

Zhu Min, Vice President of the Bank of China stated that commercial principles still prevail, while assuring the disaster-ravaged areas of ample liquidity, and capital supplies should fit with the demand and losses.

Beside this, efforts were also tightened to ensure supplies of daily necessities and production materials, such as grain, edible oil and fertilizers. The government will keep a stringent handle on their prices to hold price inflation at bay.

Chinese Premier Wen Jiabao even pledged that the Central Government will slash its spending by 5 percent this year to fund rehabilitation efforts. Wen also ordered government organizations and public institutions at all levels to skimp on meetings and business travel and freeze approvals of any new office buildings for government bodies.

Macro-policies key

The devastating earthquake has cast more uncertainty on the unsettling Chinese economy and may further aggravate inflation.

The post-quake building will stimulate demand for construction materials such as cement and iron and steel, forcing up the producer price index (PPI), a barometer of inflation at the wholesale level.

However, supplying financial aid to the quake-hit areas does not mean flirting with inflation. Zhou Xiaochuan vowed that the central bank will attach equal importance to disaster relief and a healthy economy. Macro-controls will persist to moderate price surges and overheating investments while granting a green light to damaged enterprises.

The rebuilding wave may further compound China's macro economic policies, Liang Hong, Chief China Economist with Goldman Sachs said in the Financial Times. But given Sichuan's minimal influence on the national economy, it will not impact on national prices if macro-policies remain.

Analysts predict that the central bank is not likely to hike interest rates in the short term. But it may further ease liquidity and credit controls over disaster-stricken areas to finance reconstructions. Regarding the overall banking system, a tightening stance will continue.