Shanghai economy stabilizes in May

SHANGHAI'S economy showed signs of stabilization in May as trade rebounded strongly, investment improved and manufacturing output started to grow again, Shanghai Statistics Bureau data showed yesterday.

With fading inflationary pressure, analysts suggested the local government should roll out more stimuli to support confidence among businesses and consumers.

Exports jumped 10 percent from a year earlier to US$18.9 billion last month, a sharp turnaround from the decrease of 5.6 percent in April. Imports also gained 10.7 percent to US$20.8 billion, compared with April's slide of 1.6 percent.

The value of exports reached the zenith for this year while the import value was the highest in history, the bureau said.

"Although the trade rebound may be short-lived as conditions in Europe and the United States have not had a fundamental change, it may send a positive signal that can bolster sentiment," said Li Maoyu, an analyst at Changjiang Securities Co.

Shanghai's fixed-asset investment increased 5.6 percent on an annual basis to 163.1 billion yuan (US$25.8 billion) in the first five months, up from the dip of 0.4 percent in the January-April period. Industrial production edged up 0.3 percent to 260 billion yuan in May, a turnaround from the loss of 0.1 percent in April.

China announced an interest rate cut last week, following a reduction in reserve requirement ratio in May to spur growth in the sagging economy.

Yao Wei, an analyst at Societe Generale, called for more local incentives, such as lowering tax for companies, to support growth.