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Chinese exports in May posted a 50% gain over last year, blowing away estimates and suggesting that the risk of a Chinese economic slowdown is overblown, Reuters reported, citing anonymous sources.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
The news fueled a global stock market rally on optimism the damage from Europe's debt crisis has not damaged Chinese manufacturing as much as some analysts had feared.
"The risk of double-dip (in the world economy) is not as big as many have feared and China's economic growth this year will be above 9%," Huang Lin, an economist with Soochow Securities in Beijing, told Reuters.
The Shanghai Composite Index climbed 2.8%, reversing an earlier decline to record the biggest gain since May 24. The CSI 300 Index, which tracks equities in the Shanghai and Shenzhen markets, rallied 3.1%. An index measuring financial stocks surged 4.3%, the most since Dec. 4, Bloomberg News reported.
The Shanghai index has been Asia's worst performer, shedding 21% this year on concern the government will tighten policy excessively even as Europe, China's biggest export market, is locked in a debt crisis that has led to a $1 trillion bailout and harsh austerity measures.
The surprisingly strong export figures were accompanied by other data showing that the domestic economy was performing in line with relatively strong expectations, the sources said.
Consumer prices in May rose 3.1% from a year earlier, accelerating from 2.8% in April, a senior government official told an investors' conference on Wednesday that was closed to media, according to the Reuters sources present at the meeting.
"If we assume that these numbers are pretty close to what we're going to get, then it's fairly good news for China's recovery and should dispel some of the concerns about a very sharp slowdown in the Chinese economy," Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada (NYSE: RY), told Bloomberg in a telephone interview.
The official also told the conference that value of new loans in May came in lower than previously thought at $92.2 billion (630 billion yuan). That's down significantly from the $113.2 billion (774 billion yuan) loaned in April and less than analysts had expected. The median estimate of economists surveyed by Bloomberg was $118.9 billion (600 billion yuan).
The loan figure "is far more than our estimates," Jacky Zhang, stock analyst at Capital Securities, told Bloomberg in a phone interview in Shanghai. "It shows the government may adopt a relatively easier monetary policy in the second half."
Stocks of banks and property developers rallied the most in Shanghai. Lenders and property developers have been hammered in 2010 as the government ordered banks to increase the assets they hold in reserve and set lower lending targets. Regulators also tightened mortgage lending standards and required higher down payments for homebuyers.
The worsening European debt crisis has raised major concerns in China, where the government and investors had been banking on a decent recovery in European demand to offset the gradual withdrawal of stimulus measures at home. Europe is China's largest export destination, making up 20% of total overseas sales.
Growth of exports to Europe, could drop by as much as 7% in May, June and the third quarter, Huo Jianguo, a senior commerce ministry researcher, told Reuters last month.
But other analysts have said that such concerns are overblown, at least for now.
Huang noted that while shipments to the European Union account for the lion's share of total Chinese exports, those going to debt-troubled countries represent a much smaller share.
"China's exports are expected to remain strong in the second half of this year," she said.
Prices for China's government bonds fell yesterday on concern faster inflation will force policy makers to raise money-market rates. The People's Bank of China yesterday raised the yield on one-year bills to 2.0929%, from 2.0096% last week.
"Shares may drop when investors get over happiness about the exports and start to consider the effects of higher-than-expected CPI," Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong, told Bloomberg.
Accelerating inflation "increases pressure for China government to raise the value of the yuan, which will affect the exports negatively in the future. And exports are a huge part of the economy," Yang said.
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