China's Export Growth Unexpectedly Accelerates to 28%

China's Export Growth Unexpectedly Accelerates to 28%

June 11 (Bloomberg) -- China's export growth unexpectedly accelerated in May, easing concern that government measures to tame inflation will trigger an economic slump.

Overseas sales rose 28.1 percent from a year earlier, after gaining a revised 21.9 percent in April, the customs bureau said on its Web site. That was more than the 20 percent median estimate of 17 economists surveyed by Bloomberg News.

The central bank cautioned on June 3 against exaggerating the risk that weakening global demand for exports would lead to a hard landing for the world's fourth-largest economy. The surge in shipments makes the government less likely to ease up in its fight against inflation.

``This is very good news for the central bank, backing up their argument that exports are not collapsing,'' said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai. ``It gives them more space to raise interest rates and let the yuan appreciate faster to curb inflation.''

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

Imports climbed 40 percent in May from a year earlier, the biggest gain in almost four years, the customs bureau said, citing surging prices for iron ore, crude oil, oil products, coal and soybeans. The increase was 26.4 percent in April.

The yuan traded at 6.9229 versus the dollar as of 2:46 p.m. in Shanghai after closing at 6.9255 yesterday.

Inflation

Producer prices rose 8.2 percent, the biggest increase in more than three years, the statistics bureau said today.

Consumer-price inflation slowed to 7.7 percent in May from almost a 12-year high of 8.5 percent in April, two government officials said yesterday, citing statistics bureau data. The moderation was after food-price increases eased.

China has let the yuan gain more than 5 percent versus the U.S. dollar this year, a faster pace than the 7 percent increase for all of 2007. That has cut import costs and also put pressure on exporters by making products more expensive in overseas markets.

The central bank has also ordered lenders to set aside a record 17.5 percent of their deposits as reserves from June 25 to try to prevent excess cash in the financial system from fueling inflation.

The central bank said on June 3 that the world's fastest- growing major economy was shifting from ``heated'' to more stable growth after a 10.6 percent expansion in the first quarter. Growth will slacken for the rest of 2008 and 2009 on weaker export gains, the Organization for Economic Co-operation and Development said on June 4.

BLOOMBERG