Monday's devastating earthquake in southwest China again leads coverage of China in the main newspapers. The China Daily added that the earthquake will further complicate authorities' macroeconomic policymaking at a time when growing yuan lending is already raising fears of further inflation. China's annualized growth in yuan lending dropped slightly to 14.7 % in April, but the lending volume in the first four months amounted to nearly half of the preset target for the year, figures released Tuesday by the People's Bank of China (PBOC) showed.

The Wall Street Journal provided more details on potential macroeconomic destabilization, citing Jing Ulrich, chairwoman of China equities at J.P. Morgan Chase. "This disaster is likely to bring a partial relaxation in efforts to tighten credit, with local banks encouraged to offer loans in the worst-affected areas," she said. "We expect reconstruction activity to proceed swiftly due to the national focus on responding to the crisis, and this will support growth in fixed-asset investments." Merrill Lynch economists argued that the earthquake should have less of an effect on the country's export-oriented industries and hence currency as the chief production sites for those are along the eastern coast.

The Journal also said the country’s stock markets will be affected for months in the wake of the quake. Stocks in companies with major operations in southwestern China and property insurers are expected to sink, while construction-related stocks are expected to rise on the government's plans to rebuild. Domestic exchanges in Shanghai and Shenzhen suspended shares of 66 listed companies based in Sichuan province and the neighboring municipality of Chongqing Tuesday pending details on their exposure.

In other macroeconomic figures released by the central bank Tuesday, China's corporate goods price (CGP) index, also called the wholesale price index, jumped 10.3% year-on-year in April, or 0.7% month-on-month, while China's broad measure of money supply, M2, climbed 16.94% from a year earlier to US$$6.13 trillion (RMB42.92 trillion) in April. The narrow measure of money supply, M1, rose 19.05% to 15.17 trillion yuan, 0.8 percentage points higher than March. "The statistics indicated that the Chinese economy is still challenged by excess liquidity and a rebound in credit growth," said Fan Fangzhi, an economist with the Chinese Academy of Social Sciences.

Half of Chinese financial services companies expect to take part in mergers and acquisitions in 2008, according to a survey published on Tuesday by PwC, which expects China to remain the most active M&A market in Asia, the Financial Times reported. The total value of M&A transactions dropped in the first quarter of this year after jumping by more than half in China last year, but Matthew Philips, head of PwC’s financial services M&A practice in China, said a pick-up in activity was well under way.

Baring Private Equity Asia raised US$1.52 billion for a fund aimed at investing in companies mostly in China and India with a secondary focus on Japan and Southeast Asia. Jean Salata, Baring Private Equity Asia's founder, told the Wall Street Journal the firm has already invested 30% of the fund and expects to invest the balance within three years. Salata expects the new fund to have a 60%-40% split between growth equity and buyouts. The alternative energy, media and financial services sectors are key targets.

US private equity firm Carlyle Group has signed a memorandum of understanding with the government of Shandong province that the company says will give it the first look at deals in China’s second most valuable province by output. The central government has been cautious about opening deals to overseas investors, but Carlyle is relying on the important role provincial governments play in industry as shareholders, regulators and promoters of local companies to open doors, the Journal reports. Carlyle's agreement includes plans to help Chinese companies based in Shandong in their efforts to expand overseas.

A survey of 3,800 people jointly conducted by China Youth Daily and Sina.com shows people want to know how much government officials earn, China Daily reported. The research was carried out following the introduction on May 1 of a government information disclosure regulation, which demands local governments be more transparent on issues that affect the public interest. More than 77% of people chose 'assets of government officials' as the information they most wanted, while budgetary and accounting information, land seizures, house demolitions, and how governments react to "sudden public incidents" were also high on the wish list.

Finally, the value of software and services exported from China is forecast to grow at a compound annual growth rate of nearly 38% through 2011, China Daily reported, citing industry estimates. The total value of software and services exported from China was an estimated US$1.8 billion in 2006, paltry compared with India's estimated US$41 billion export revenue in the year to March 2008. India’s export revenues from the sector are expected to jump to US$60 billion by March 2010. Timothy Bush, an analyst at Merrill Lynch, said Chinese firms had to move up the value chain if they hoped to compete with Indian firms such as Tata Consultancy and Infosys, which are fast chasing consulting revenue. However, Chinese IT outsourcing firms have one advantage over their export-orientated Indian rivals; they mainly serve the local arms of domestic and foreign companies, which could shield them from the worst impact of a US recession. Top players among China's up to 3,000 firms include VanceInfo Technologies, Chinasoft International, Sinocom Software and Shenyang Neusoft Co Ltd.