TO THE POINT: The release of economic figures for May provided a fresh snapshot of the country's economy. The consumer price index (CPI) rose 3.1 percent in May, surpassing the government's target of 3 percent for the while year, which ignited inflationary concerns. The producer price index (PPI) grew 7.1 percent year on year in May, but economists believe the PPI growth will not feed into the CPI. Exports bounced back while investments and consumption continued to grow. Bank lending slowed down as housing mortgages shrank. The Agricultural Bank of China received a regulatory nod for its initial public offering in both Shanghai and Hong Kong.

By HU YUE

Figures in May

CPI and PPI

The consumer price index (CPI), a main gauge of inflation, rose 3.1 percent in May from one year ago, an increase of 0.3 percentage points from April.

The increase is attributable to rising food prices and residential factors. The government's 3-percent target for the whole year is still achievable, said Sheng Laiyun, a National Bureau of Statistics (NBS) spokesman.

The inflationary pressures are expected to temper off in the months to come as food prices peak and global deflationary forces pick up, he said.

The producer price index (PPI), a major measure of inflation at the wholesale level, grew 7.1 percent year on year in May, up 0.3 percentage points from April's 6.8 percent.

The PPI will not feed into CPI as manufacturers are less likely to pass the costs pressure onto consumers, Sheng said.

The manufacturers are not expected to raise their product prices amid fierce competition, and they can also cushion some of the costs pressure through technological improvements, he said.

Housing prices

House prices in 70 large and medium-sized Chinese cities rose by 12.4 percent year on year in May, 0.4 percentage points lower than April. New home prices rose 15.1 percent while that of second-hand ones grew 9.2 percent.

In May, floor space sold stood at 67.77 million square meters, a decrease of 12.74 million square meters from April.

Investment

Urban investment in fixed assets for the first five months rose 25.9 percent year on year to 6.74 trillion yuan ($986.76 billion). The growth rate was 0.2 percentage points lower from the first four months.

Investment in the property sector climbed 38.2 percent to 1.39 trillion yuan ($203.6 billion) in the first five months.

Investment completed by the state-owned and state-holding sector rose 21.7 percent to 2.8 trillion yuan ($410 billion) in the five months.

The policymakers have handed out strong incentives for private sector investments, but the full effect remains to be seen, said Zhou Donghai, a senior analyst with Huachuang Securities Co. Ltd.

Retail sales

Retail sales of consumer goods totaled 1.25 trillion yuan ($183 billion) in May, rising 18.7 percent year on year, 0.2 percentage points faster than April.

Urban consumption hit 1.08 trillion yuan ($158 billion) in May, up 19.1 percent year on year, while rural consumers spent 163.7 billion yuan ($24 billion), up 15.8 percent.

With the absence of a stable export sector, the consumer market has put a floor under what would otherwise have been a deeper economic downturn.

But the retail sales in May were in part inflated by rising CPI, said Xu Jian, a senior analyst at the China International Capital Corp. Ltd.

China still has considerable ground to cover before reaching a consumption-driven economy, he said.

(Data source: National Bureau of Statistics)

Bank lending

New loans denominated in renminbi in May fell to 639.4 billion yuan ($93.6 billion) from 774 billion yuan ($113.3 billion) in April, said the People's Bank of China, the central bank.

The May figure brought new loans in the first five months to more than 4 trillion yuan ($585.8 billion), accounting for 54 percent of the total 7.5 trillion yuan ($1.1 trillion) China has targeted for the full year.

Bank lending is losing momentum because housing mortgages declined to a trickle, said Liu Yanqun, an analyst with the CITIC Securities Co. Ltd.

Meanwhile, the country has hiked the reserve requirement ratio three times this year, he said.

Foreign trade

China's exports surged 48.5 percent year on year in May to reach $131.76 billion, accelerating by 18.1 percentage points from April, said the General Administration of Customs.

Imports totaled $112.23 billion, representing a growth of 48.3 percent compared with 49.7 percent in April.

The trade surplus stood at $19.53 billion, soaring from $1.68 billion in April.

From January to May, the total value of foreign trade rose 44 percent year on year to $1.1 trillion.

It seems that Western consumers are getting back into a buying mood as their economies recoup strength, said Lu Zhengwei, chief economist at the China Industrial Bank.

"But Chinese exporters have yet to completely shake off the effects of the downturn," he said. "Uncertainties clouding their prospects include costs inflation and weakening demands from Europe."

FDI

Foreign direct investment (FDI) into China in May rose by 27.48 percent year on year to $8.13 billion, said the Ministry of Commerce.

The figure brought FDI to $38.92 billion in the first five months, an increase of 14.31 percent from a year earlier.

China approved the establishment of 9,638 overseas-funded companies from January to May, up 22.15 percent year on year.

The manufacturing sector became the favorite capital destination, accounting for 47.32 percent of the total FDI in the first five month, said Yao Jian, spokesman of MOFCOM.

Meanwhile, FDI into the service sector increased 32.05 percent from a year earlier, while that in the primary sector, including farming, fishery and forestry, jumped 85.49 percent year on year.

Fiscal revenues

China's fiscal revenue totaled 791.77 billion yuan ($115.93 billion) in May, up 20.5 percent from a year earlier, said the Ministry of Finance.

The ministry attributed the drastic increase to tax revenue increases because of the economic recovery and lower comparison base in the same period of last year.

ABC's Stride

The Agricultural Bank of China (ABC) recently received approval from securities regulators for its planned initial public offering (IPO) in Shanghai and Hong Kong. It is the last of China's "big four" state-owned commercial banks to go public. The bank has nearly 24,000 branches and 320 million customers.

The green light appears to have ended speculation that the long-awaited IPO might be delayed amid recent stock market turmoil. The Shanghai Composite Index has dived by more than 20 percent since mid-April while the Hang Seng Index has lost some 12 percent in the same period.

The bank plans to sell up to 22.24 billion A-shares on the Shanghai Stock Exchange and up to 25.41 billion shares in Hong Kong, excluding an over-allotment option. The IPO could possibly be the world's largest ever, surpassing a previous record of $21.9 billion set by Industrial and Commercial Bank of China in 2006.

Meanwhile, the bank will allocate 35 percent of its IPO to cornerstone investors to reduce pressure on weak stock markets, including Singapore's Temasek Holding Pte. Ltd. and Kuwait Investment Authority, said a report by China Business News.

The offering of preferential shares to cornerstone investors will hopefully ignite investor interest and show the deal has strong financial backing.