However, investment in fixed assets soared as Beijing tries to boost spending at home to compensate for a dive in shipments to key markets that have been sent into recession.

Customs authorities said on Thursday that exports dived 26.4 percent year on year in May to 88.8 billion dollars as a result of severe downturns in major destinations North America and Europe.

However, the figures did show a rise of 0.2 percent from April.

Imports, another sign of the strength in economic activity, also fell in May, by 25.2 percent to 75.4 billion dollars, customs said.

The trade surplus in May stood at 13.4 billion dollars, according to the authorities, who did not provide a percentage change compared with the same month last year.

Meanwhile the National Bureau of Statistics said that investment in fixed assets rose 32.9 percent year on year in the first five months as a massive stimulus package aimed at boosting spending kicked in.

The bureau did not report figures for the month alone but given already available data, investment increased by more than 38 percent year on year.

Spending on rail projects was up 110.9 percent, the National Bureau of Statistics said.

Investments initiated by Beijing were 28 percent higher in the first five months, while those carried out by local governments rose 33.4 percent.

China late last year introduced a 580-billion-dollar package as it tried to mobilise its 1.3 billion people into spending in its effort to kickstart the economy.

It is also aware of avoiding mass unemployment, one of the main worries for the government, which fears it could lead to social unrest.

The government has unveiled a number of policies to boost consumption including tax rebates on car sales and subsidies for buying white goods.

"Amidst continued weakness in external conditions, China will likely remain reliant on domestic investment for growth in the short term," Morgan Stanley said in a research note.

China's economic growth is expected to slow to a 19-year low of 6.5 percent in 2009, according to the World Bank, after notching up double-digit expansion between 2002 and 2007.

It grew 6.1 percent in the first quarter, the lowest in at least a decade.

On Wednesday Beijing announced that the consumer price index fell for the fourth month in a row, by 1.4 percent year on year, while wholesale prices dropped 7.2 percent.

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