The central business area of New Zealand South Island's largest city of Christchurch is to be evacuated after the strong earthquake on Saturday morning.

Civil Defense Minister John Carter said a decision has been made to clear people out of the central Christchurch business district for their own safety, following Saturday morning's 7.1- magnitude earthquake.

The central city will remain closed off until Sunday while damage is assessed.

A state of emergency has been declared in Christchurch city and the Selwyn District after the earthquake struck near Christchurch, causing extensive damage to buildings, and cutting power and water supplies. Two people have been seriously hurt.

New Zealand Prime Minister John Key flew to the quake-hit area on Saturday afternoon.

The quake occurred at 4:35 a.m., 40 km west of Christchurch, at a depth of approximately 10 km. There have been dozens of aftershocks, the strongest at 5.3-magnitude, the New Zealand Institute of Geological and Nuclear Science (GNS Science) reported.

The GNS Science had earlier put the magnitude at 7.4 on the Richter scale.

A Xinhua reporter in Christchurch said the quake was strongly felt in the city and "she was very shaken." Some books fell to the ground from the book shelf. She said electricity was out in her house and aftershocks were felt.

The Xinhua reporter saw some residents were out in the street in their pajamas looking scared and worried. Some old building facades in central Christchurch have collapsed, cars have been crushed and many homes have been damaged.

One man, in his 50s, was in serious condition in Christchurch Hospital after he was hit by a falling chimney. Another man has serious injuries after being cut by glass.

Christchurch Hospital said it has had an influx of people on Saturday, but is coping well. It has treated a number of people with broken bones, and others with minor injuries such as cuts and bruises.

Civil Defense said residents should not leave now, but should pack what they will need to move from their homes.

The Earthquake Commission estimates the cost of the earthquake will run into hundreds of millions of dollars.

Power cut, water supplies affected

Electricity was slowly being restored to parts of Christchurch city, while lines company Orion said the quake cut supplies to large parts of the rural area between Waimakariri River to the north and Rakaia River to the south.

Orion believes it will have power to 90 percent of Christchurch city by nightfall on Saturday, however, it may not be able to restore the supply to rural areas for several days.

The water supply at Rolleston 22 km southwest of Christchurch, is contaminated. The sewage treatment there has suffered serious damage and people in the area are urged to conserve water.

Sewer lines and water pipes have ruptured in Christchurch city, and Civil Defense is making arrangements for tankers to be brought in. The council is telling residents on flat areas of the city to boil water.

Port damaged, airport temporally closed

Christchurch airport was closed for some time and reopened on Saturday afternoon, and while there appears to be no major damage to the runway, the domestic terminal has been damaged.

Police were stationed at the entrances to the airport and people were being turned away while the airport is closed.

There has been extensive damage to the wharves at Port of Lyttelton.

The New Zealand Army was preparing to send troops to assist in the disaster relief work in Christchurch if there is requirement. A spokesperson said a meeting at Joint Force Headquarters is assessing the status of the force.

Civil Defense headquarters has activated the national crisis center. No tsunami alert has been issued.