China Exports Jump 48.5%, Property Prices Surge as Overheating Risk Grows

China’s exports jumped the most in six years and property prices rose at a near-record pace, signs that the economy is withstanding the sovereign-debt crisis in Europe and remains at risk of overheating.

Exports gained 48.5 percent in May from a year earlier, the customs bureau said today, more than the 32 percent median estimate in a Bloomberg News survey of 32 economists. None expected such a big gain. Real-estate prices rose 12.4 percent across 70 cities, the statistics bureau said separately.

Stocks fell, extending the Shanghai Composite Index’s 21 percent decline this year, on concern the government will step up policy tightening. The leap in exports could be a blip before European demand wanes, while falling property sales signal a looming slowdown in investment that may cool the world’s third- biggest economy, investment bank China International Capital Corp. said.

Today’s data “may be the good news before the bad news as the European debt crisis curbs the region’s demand and property- market corrections drag on investment,” said CICC’s Xing Ziqiang, a Beijing-based economist. “Exports may decelerate rapidly later this year and economic growth may slow to around 7.5 percent in the fourth quarter.”

In the first quarter, China’s growth was 11.9 percent from a year earlier.

Shanghai’s stock benchmark dropped 0.4 percent as of 1:18 p.m. local time as the MSCI Asia Pacific index rose 0.8 percent. Chinese stocks jumped the most in more than two weeks yesterday after a Reuters report indicated the size of the export increase and larger growth in new loans than economists had expected.

Betting on Yuan

Non-deliverable yuan forwards were little changed, indicating traders are betting that the currency will gain about 0.5 percent against the dollar in the next 12 months. Since July 2008, the yuan has been held by officials around 6.83 per dollar, after Premier Wen Jiabao’s government allowed a 21 percent advance in the prior three years.

Today’s export number was flattered by the comparison with May 2009, when shipments fell by a record. Exports rose to $131.76 billion last month, the highest value since September 2008, and imports climbed 48.3 percent to $112.23 billion. The trade surplus of $19.53 billion was the biggest in seven months.

The trade gap “suggests that the pressures on the yuan to appreciate remain” and will “provide evidence to some that China’s currency is still undervalued,” said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd.

Global Risks

Shipments to the European Union jumped 50 percent from a year earlier, compared with 29 percent in April. Those to the U.S. climbed 44 percent, up from 19 percent. In contrast, the International Monetary Fund warned yesterday that global economic risks have “risen significantly” and Europe’s woes could disrupt global trade.

China’s pegging of the yuan to the dollar has resulted in a 20 percent gain against the euro this year that will make exports to that region less competitive with rivals such as South Korea.

“The strong rebound in exports may be short-lived, with the debt crisis yet to affect Europe’s economy,” said Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co. “Still, solid export growth offers a perfect window of opportunity to allow more flexibility in the yuan by de-pegging from the dollar and widening the trading band.”

The jump in property prices compared with a 12.8 percent increase in April from a year earlier, which was a record for the data series beginning in 2005. China intensified a crackdown on real-estate speculation in April to prevent asset bubbles and keep housing affordable.

Sliding Property Sales

Last month marked the first easing in the annual rate of property price gains in 11 months, while the figure exceeded the 12 percent median estimate in a Bloomberg News survey of seven economists. Month-on-month, prices advanced 0.2 percent and sales slid 25 percent.

Sales by China Vanke Co., the nation’s biggest publicly traded property developer, dropped 20 percent in May from a year ago, and Guangzhou R&F Properties Co.’s contracted sales shrank 48 percent, according to the developers’ stock exchange filings.

Last month’s biggest year-on-year price gains were in Hainan, the southern island being developed as a tourist destination. Hainan’s Haikou and Sanya cities reported annual increases of 52.8 percent and 50.8 percent.

Beijing, Guangzhou

Among the 70 cities covered, 12 had price declines in May from the previous month, including Beijing, Nanjing and Guangzhou. Eastern China’s Hangzhou saw the biggest monthly drop, at 0.6 percent.

In trade, today’s figures contrasted with March, when China posted its first deficit in six years as imports surged, outpacing export growth by 42 percentage points. Inbound shipments will continue to decelerate on falling commodity costs and a slowdown in domestic investment growth, according to Bank of America-Merrill Lynch.

May’s export gain was the biggest in more than six years after smoothing out distortions in January and February each year caused by a Lunar New Year holiday.

--Li Yanping, with assistance from Joyce Koh in Singapore. Editors: Paul Panckhurst, Russell Ward.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

Enlarge image

A container ship at port in Shanghai

Qilai Shen/Bloomberg

A container ship docked at the Yangshan deep-water port in Shanghai.

A container ship docked at the Yangshan deep-water port in Shanghai. Photographer: Qilai Shen/Bloomberg

June 10 (Bloomberg) -- Adrian Mowat, JPMorgan Chase & Co.'s chief Asian and emerging-market strategist, talks with Bloomberg's Linzie Janis about the outlook for China's economy. China's exports jumped the most in six years and property prices rose at a near-record pace, signs that the economy is withstanding the sovereign-debt crisis in Europe and remains at risk of overheating. Mowat, speaking from Beijing, also discusses the global economy, and China's currency policy. (Source: Bloomberg)