Chinese exports in March were down by double digits from a year earlier, but the decline was smaller than in February, a newspaper linked to the Ministry of Commerce reported on Wednesday.

The Chinese-language International Business Daily cited an unnamed ministry official for its information.

Exports in February fell 25.7 percent from a year earlier. Economists polled by Reuters expect a 21.5 percent fall in March.

If the report is borne out when the trade figures are released in coming days, it would be the latest piece of tentative evidence that the economy could be over the worst of a slump induced by the global credit crunch.

The sub-index for new orders in this month's purchasing managers' indexes for China improved -- although both remained firmly in negative territory -- while the year-on-year rate of decline in power generation slowed in March to 0.71 percent from 3.7 percent in the first two months.

Paul Cavey, China economist at Macquarie Securities in Hong Kong, on Wednesday raised his forecast for 2009 gross domestic product growth by a percentage point to 7.5-8.0 percent based on stronger-than-expected capital spending.

Infrastructure investment is rising in response to the government's 4 trillion yuan ($585 billion) stimulus -- excavator sales are up 50 percent -- while the bounce so far this year in property building is believable given the surge in bank loans and working capital, Cavey said in a report.

Chinese banks extended a record 1.87 trillion yuan in new loans in March, two state newspapers reported on Tuesday.

TUG OF WAR

Helen Qiao and Yu Song at Goldman Sachs agreed that the economy was gaining strength, due in part to rapid loan growth, and said a further relaxation of fiscal or monetary policy would probably prove to be unnecessary.

Although Qiao and Song see upside risks to domestic demand growth, Goldman is gloomy about the export outlook and has not changed its 2009 GDP growth forecast of 6.0 percent.

We believe the trough of sequential growth is already behind us, they said in a note to clients.

In our view, the foreseeable growth rebound in the first quarter of 2009 is strong, especially relative to the rest of the world, but it is unlikely to be sufficient to push GDP growth back to the government's target of 8 percent this year, they added.

The Chinese Academy of Social Sciences (CASS), the government's top think-tank, also sounded a cautious note.

With the world economy in trouble, exports were unlikely to recover any time soon and this would spell difficulties for export-oriented companies in China's coastal provinces, CASS said in a report.

Pressure on corporate earnings would in turn weigh on growth in incomes and consumption. The depressed property sector, which will find it difficult to recover in 2009, is also a handicap for consumer spending and the broader economy, the think-tank said.

Jing Linbo, a CASS researcher, said policymakers should not take GDP growth as the only yardstick of economic progress.

We need to strike a balance between speed and quality to complete the transformation of our pattern of economic growth, Jing said in the report.

(Reporting by Lan Wang and Alan Wheatley; Editing by Ken Wills)

($1=6.836 Yuan)

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