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Wednesday, June 11, 2008

China Export Growth Accelerates in May

China's export growth accelerated in May, easing concern that a strengthening yuan and a slowdown in U.S. demand may be in the process of slowing excessively the Chinese economy. Overseas sales rose 28.1 percent from a year earlier, after gaining a revised 21.9 percent in April, according to the Chinese customs bureau today.

Exports to the U.S. accelerated, withstanding a 10 percent gain in the yuan against the dollar in the year through May. Imports jumped 40 percent because of soaring raw-material costs, supporting the central bank's case that inflation is a bigger threat than weakening global demand. Surging prices for iron ore, crude oil, oil products, coal and soybeans drove the biggest increase in imports in almost four years, according to the customs bureau. The gain was 26.4 percent in April.

The trade surplus was $20.2 billion, down from $22.4 billion a year earlier and less than the $21.3 billion estimate in the survey of economists. For the first five months, the surplus has narrowed 9 percent from a year earlier.

Exports to the U.S. rose 9.1 percent in the first five months from a year earlier, up from the 6.9 percent gain through April, the customs bureau said. Shipments to the European Union climbed 27.4 percent, an increase from 25.4 percent.

Machinery and electronic exports climbed 59 percent from a year earlier. Trade with India surged 70 percent in the first five months, the quickest gain among China's top 10 trading partners, the customs bureau said.

Producer prices rose 8.2 percent in May, the biggest increase in more than three years, the statistics bureau said today, indicating consumer-price inflation which may have fallen back in May to 7.7% (according to recent "leaks") from the 8.5% peak in February could well rebound in the not too distant future.

The producer price of gasoline rose 11 percent in May from a year earlier after gaining 10.8 percent in April. Ferrous metals jumped 26.7 percent after climbing 24.8 percent, the statistics bureau said.

House prices in China's 70 major cities rose 10.1 percent in April from a year earlier, slowing for a third month after the government raised mortgage rates and imposed stricter down- payment requirements.

China's Central Bank told lenders earlier this week to set aside more money for the fifth time this year in an attempt to cool inflation. Banks must put aside a record 17 percent of deposits as reserves starting June 15, and this figure will rise to 17.5 percent from June 25, according to the People's Bank of China. The move is expected to drain about 422 billion yuan ($60 billion) from the financial system. Local-currency deposits stood at 42.2 trillion yuan at the end of April.

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