China's export-price inflation is masking the extent of a slowdown in growth in overseas shipments, Royal Bank of Scotland Group Plc said.

"Rising export prices exaggerate the strength of export growth," Ben Simpfendorfer, a Hong Kong-based economist for the bank, said in an interview with Bloomberg News last Friday. "If the value of goods sold is rising, it will appear as if overall export growth is strong even if the volume of goods sold is weakening."

China's government may be tilting its policy toward supporting growth, rather than fighting inflation, after exports cooled in the first half and the pace of expansion slowed for the fourth straight quarter. China raised tax rebates for shipments of textiles and garments last Friday and some officials are pressing for slower gains in the yuan to protect exporters.

Export prices may have climbed as much as 5 percent last month from a year earlier, Simpfendorfer said. The estimate is based on United States data for the cost of imports from China, which showed prices falling in early 2007 and climbing steadily since.

Overseas shipments rose 21.9 percent in the first half from a year earlier, down from 25.7 percent in all of 2007, as US demand waned. RBS had estimated that export growth would slow to below 15 percent by mid-year.

China increased tax rebates on exports of textiles and garments to 13 percent from 11 percent last Friday, according to the State Administration of Taxation. The Ministry of Commerce had asked China's Cabinet to rein in currency gains and raise some rebates, a ministry official said on July 14, speaking on condition of anonymity.

China's gross domestic product grew 10.4 percent in the first half, the fastest pace among the world's 20 biggest economies. Overseas shipments grew 17.6 percent in June, the slowest pace in four months, on weaker gains in sales to the US and the European Union.

President Hu Jintao has reiterated a target of steady and fast economic growth, while tackling inflation that rose to a 12-year high in February.

(Shanghai Daily August 4, 2008)