Fri, Jul 11, 2003 - Page 11 News List

China's exports, production surge more than expected

BLOOMBERG

China's exports and factory production surged last month, exceeding economists' expectations, as rising foreign investment and the yuan's link to the weaker US dollar bolstered the competitiveness of its manufacturers.

Exports rose 33 percent from a year earlier to US$34.5 billion, while production increased 17 percent to US$363 billion, according to government reports released in Beijing. The median forecast of economists surveyed by Bloomberg News was for growth of 27 percent in exports and a 13 rise in factory output.

China's entry into the WTO "triggered a wave of foreign direct investment," said Andy Xie, Morgan Stanley's chief economist in Hong Kong.

Other Asian countries such as Singapore "have lost their competitiveness in manufacturing exports," he said.

China exports are growing because companies such as South Korea's Samsung Electronics Co and Germany's Siemens AG are opening new factories and increasing output, taking advantage of the yuan's peg to the dollar.

Foreign investment in China shot up almost two-fifths to US$5.45 billion in May, the peak of the SARS epidemic that infected 5,329 people and killed 338 in China.

Siemens AG chairman Heinrich von Pierer visited Beijing earlier this week and announced that the world's biggest engineering company would spend 100 million euros (US$113 million) to build a new office there.

China, the nation worst infected by SARS, is growing even as Singapore yesterday said its economy shrank a record 12 percent in the second quarter because of the disease. China is due to announce its second-quarter GDP next week.

"China's economy has proved remarkably resilient to SARS," said Rob Subbaraman, an economist at Lehman Brothers Japan.

China's trade surplus narrowed 27 percent to US$2.1 billion last month, as imports surged 40 percent to US$32.3 billion.

China's growth also was helped by government tax breaks and increased spending during the SARS outbreak.

"The government came out with a lot of policies to encourage investment," said Gao Huiqing, economist at the State Information Center think tank in Beijing.

"Everyone, especially private enterprises, was encouraged to increase investment," Gao said.

Gao also said exports were helped by an increase in tax breaks given to companies that export.

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