Chinese economy keeps up strength, survey shows

BEIJING (BestGrowthStock) – China’s fast-growing economy retained its momentum last month as output and new orders showed no sign of suffering from the government’s campaign to cool the red-hot property sector.

An index based on an official survey of purchasing managers’ rose to 55.7 in April from 55.1 in March, holding above the threshold of 50 that demarcates expansion from contraction for the 14th month in a row.

The reading was close to the median forecast of 55.8 in a poll by Reuters of 11 economists.

Input prices rose at the fastest pace since the second half of 2008, keeping alive fears that the world’s third-largest economy could overheat due to the massive monetary and fiscal stimulus provided last year to cushion the global crisis.

“It is expected that production costs will increase significantly. We need to pay close attention to the challenges that companies are facing, Zhang Liqun, a government economist, said in a commentary for the China Federation of Logistics and Purchasing (CFLP), which issued the survey on Saturday.

The sub-index for input prices rose to 72.6 in April from 65.1 in March; but in five of the 20 sectors surveyed by the federation the sub-index exceeded 80.

The overall PMI was below the boom-bust line of 50 in only four of the 20 industry groups: tobacco, pharmaceuticals, non-ferrous metals and oil refining and coking.

China has raised banks’ reserve requirements twice this year and ordered banks to lend no more than 7.5 trillion yuan in 2010, down from a record 9.6 trillion in 2009.

But it has not raised interest rates — unlike some regional neighbors including India, Malaysia and Australia — and it has resisted international pressure to let the yuan rise after keeping it pegged to the dollar since July 2008.

Last year’s credit surge has not led to a spike in inflation. Consumer prices rose 2.4 percent in the year to March.

But plentiful liquidity has pumped up property prices, prompting the government to wheel out an array of administrative measures to deter speculative buying in a sector that accounts for about a quarter of overall investment.

The strength of China’s economy (Read more about the fastest growing economy.) is sucking in more and more imports. South Korea on Saturday reported that average exports per working day rose last month to $1.66 billion from $1.57 billion in March.

South Korea’s overall exports rose 31.5 percent compared with April 2009, in line with forecasts.

Stock Market News

(Reporting by Langi Chiang and Alan Wheatley)

Chinese economy keeps up strength, survey shows