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Industrial output growth accelerates in May

(Shanghai Daily)
Updated: 2007-06-14 13:18

China's industrial production growth unexpectedly accelerated in May, underscoring the government's efforts to cool the world's fastest-growing major economy was not effective enough, Bloomberg said today.

Output rose 18.1 percent in May from a year earlier, the National Bureau of Statistics said today, after gaining 17.4 percent in April. That compared with the 17 percent median estimate of 19 economists surveyed by Bloomberg News.

China's Premier Wen Jiabao said yesterday that monetary policy needs a ``moderate tightening'' to prevent the economy from overheating, suggesting the central bank may raise interest rates. Record trade surpluses have pumped money into the financial system, stoking investment, inflation and a stock market boom.

The central bank has raised interest rates twice this year and ordered lenders to set aside more reserves five times. The benchmark one-year lending rate is 6.57 percent and the deposit rate is 3.06 percent.

Output growth was the fastest since the 18.5 percent pace of January and February. Figures for those months are combined to eliminate distortions caused by the timing of Lunar New Year holidays.

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For the first five months, industrial production climbed 18.1 percent from the same period last year, up from 16.6 percent growth for all of 2006.

``Strong industrial production in China reflects strong external and internal demand,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``It's also too early for recent monetary tightening to have had an impact.''

Retail sales climbed 15.9 percent in May from a year earlier, the biggest increase in three years, and exports jumped 28.7 percent.

``Increases in lending rates and reserve requirements should help stabilize fixed-asset investment and industrial production this year,'' said Huang Haizhou, an economist at Barclays Capital in Hong Kong.

Inflation accelerated in May to 3.4 percent, the highest in more than two years.

Besides monetary policy, the government has tightened approvals of investment projects, curbed land use, increased energy costs, and cut export rebates to discourage wasteful spending on factories.

China last month started a campaign to cool excess growth in industries including iron, steel, copper, aluminum, zinc and cement that pollute and consume energy heavily.


(For more biz stories, please visit Industry Updates)



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