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Trade, exports stay bleak but assets are bright

CHINA'S trade growth posted a seventh consecutive fall in May while exports dived even further from the drop in April, dampening analysts' expectation that overseas sales may have started recovering.

But China's fixed asset investment staged a strong growth last month, countering the falling exports and giving a stabilizing shot to the country's economy.
China's exports in May fell a record 26.4 percent from a year earlier to US$88.8 billion, the General Administration of Customs said today.

The sharp contraction dropped further from the falls of 22.6 percent in April and 17.1 percent in March, and contrasted with the general market expectation of a retreat of around 20 percent.

May imports sank 25.2 percent on the annual basis to US$75.3 billion, compared with the decreases of 23 percent in April and 25.1 percent in March.

It took the trade volume in May to US$164.1 billion, down 25.9 percent from a year earlier and set the monthly trade surplus at US$13.3 billion.

"The overseas demand was still quite weak though there have been some early signs of global economic stabilization," said Xue Jun, a trade analyst at Changjiang Securities Co.

"But it may be not too far away from the bottom as the government is boosting efforts to help exporters while China's major trading partners have hopefully passed the worst time in the recession."

China has raised export tax rebates on more than 600 types of goods from this month. Export manufacturers benefited from the new subsidies which included makers of machinery, furniture, toys, plastic products and steel.

China has raised the rebates seven times since August. The cost of the subsidies came to 102.9 billion yuan (US$15.1 billion) in the first quarter, up 18.4 percent from a year earlier.

The May Purchasing Managers Index, which measures manufacturing activities, also posted an above-50 reading in its sub-index for new export orders for the first time in 11 months, suggesting that exports may strike a comeback in the coming months.
"The government should reinforce the efforts to assist the exporters because a recovery can't be sustained without a sound export sector," Xue added.

Although there was bad news on the trade front, China's fast increasing investment gave analysts a surprise, this time a pleasant one.

China's urban fixed-asset investment jumped 32.9 percent in the first five months to 5.35 trillion yuan, the National Bureau of Statistics said today.

The jump, the biggest in five years, was up from the expansion of 30.5 percent in the period through April and was better than the general market expectations of an increase of around 31 percent.

Property investment in the January-May period increased 6.8 percent to 1.02 trillion yuan while spending on coal exploration gained 38.4 percent to 72.9 billion yuan. Investment in railway construction rocketed 110.9 percent to 133.8 billion yuan.

"Beating market expectations, the FAI staged a strong gain fueled primarily by the acceleration in policy-driven projects," said Wang Qing, an economist at Morgan Stanley. "China will likely remain reliant on domestic investment for growth in the short term amidst continued weakness in external conditions."

Wang noted the increase in property investment was worthy of special attention as the gain in May alone had risen to 12 percent year on year, a massive jump compared with just 1 percent at the bottom of the cycle in the January-February period.

He expected the investment, countering the slumps in exports, would keep the strong momentum growing as China implemented its 4-trillion-yuan stimulus measures.

In May, the European Union remained China's largest trading partner by lodging bilateral sales of US$26.8 billion. Growth contracted 22.1 percent from a year ago.
It was followed by the United States with trading value retreating 17.1 percent to US$22.4 billion. The Association of South-East Asian Nations replaced Japan to take third place with US$15.9 billion.


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