China's inflation rate, export growth and bank loans exceeded economists' forecasts in May, Reuters reported, spurring an rally in stocks by showing no evidence Europe's debt crisis is impairing the Chinese expansion.
Consumer prices rose 3.1 percent from a year earlier, exports jumped about 50 percent and new loans totaled 630 billion yuan ($92.3 billion), Reuters reported, citing three unnamed people who said a government official stated the figures at an investor conference. The central bank and statistics and customs bureaus declined to comment when reached by Bloomberg.
The benchmark Shanghai Composite Index rose the most in more than two weeks, paring losses for the year that have been spurred by concern China's economic expansion will slow. The report follows a People's Bank of China statement late yesterday saying growth will be affected by the debt crisis and trade frictions.
"You don't have that same concern about a real sharp slowdown if those numbers turn out to be right," said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. "The market had been pricing in a very sharp downturn in China."
The inflation, trade and lending figures reported by Reuters all exceed economists' estimates in Bloomberg News surveys ahead of the trade data scheduled for release tomorrow and the consumer price index due June 11.
Inflation ceiling
Economists anticipated a 3 percent gain in consumer prices, according to the median of 32 estimates. Forecasts also indicated 600 billion yuan of new loans and a 32 percent increase in overseas shipments.
A 3.1 percent inflation rate would exceed the government's targeted full-year ceiling of 3 percent, adding to risks of overheating in the fastest-growing major economy. The government has made damping inflationary expectations a top policy priority.
China's economy "still has the risk of overheating and inflation is still a major risk," Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, said this week. China needs slower growth "to prevent much higher inflation," he said.
Currency peg
Accelerating price gains will pressure the government to raise the value of the yuan, which would hurt future exports, Monika Yang, who helps oversee $2 billion at Hamon Asset Management Ltd in Hong Kong, said today. The government has kept the currency pegged at about 6.83 per dollar since July 2008 to aid exporters.
Shares may drop tomorrow when investors "get over happiness about the exports and start to consider the effects of a higher-than-expected CPI," Yang said.
Officials have already ordered banks to hold more of their assets in reserve, set a lower lending target for 2010, and drained liquidity through bill sales. Regulators have also restricted mortgage lending and raised down-payment requirements for home purchases.
This week's data may show the impact from such efforts. Both the new loan figure reported by Reuters and the median estimate for the number in the Bloomberg survey are down from April, when the gain was 774 billion yuan. M2, the broadest measure of money supply, may have expanded 21 percent from a year earlier, the least in 15 months.
Property prices
Additionally, property-price gains may have slowed for the first time in almost a year. May's increase was 12 percent, down from a record 12.8 percent in April, according to the median estimate in a separate survey.
Justin Lin, the World Bank's chief economist, said June 4 that first-quarter growth was "a bit overheated" and a small slowing would be a good thing. State economist Zhang Liqun estimating in a June 7 interview in Beijing that this quarter's expansion may be between 10 percent and 11 percent, a moderation in economic growth from 11.9 percent in the first quarter.
Industrial production may have risen 17 percent in May from a year earlier, slipping from a 17.8 percent increase in April, according to the median forecast. Baosteel Group Corp, the nation's second-biggest steelmaker, said yesterday that demand from the automotive and home-appliance industries is "weak" and mills face a difficult second half of the year.
Urban fixed-asset investment may have gained 25.7 percent in the January-May period, compared with 26.1 percent in the first four months of the year, the survey showed.
