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China July exports slow sharply

(Xinhua)

11:07, August 12, 2012

China's export growth slowed sharply to a six-month low in July on dwindling foreign demand, strengthening anticipation for weak trade performance for the whole year and more government action to support the economy.

Exports rose 1 percent year on year to 176.9 billion US dollars in July, plummeting from the 11.3-percent growth seen in June and well below market expectations, the General Administration of Customs (GAC) said Friday.

Imports also lost steam, increasing 4.7 percent year on year to 151.8 billion US dollars, compared with a growth of 6.3 percent in June.

Foreign trade expanded 2.7 percent year on year to 328.7 billion US dollars in July, according to the GAC data.

"The July data were poor indeed," said Zheng Yuesheng, head of the GAC statistical department. "It will be an arduous task to fulfill our foreign trade target, as external demand is weak."

Wang Tao, chief China economist of USSecurities, saw increasing downside risks in exports in the third quarter due to sagging US and European markets.

China's exports to the EU, its largest trading partner, slumped 16.2 percent year on year in July, GAC figures showed.

Exports to the United States, the country's second-largest trading partner, edged up 0.6 percent year on year, compared with 10.6-percent growth in June.

In the first seven months, exports rose 7.8 percent year on year to 1.13 trillion US dollars.

The slowing export growth was caused by a high base in the same period last year, the sluggish recovery of the US economy, rising factory costs and growing trade friction, the Bank of Communications said in a commentary.

Grim prospects for the global economy and increasing labor costs and trade disputes will continue to drag down exports in August, it forecast.

However, imports may recover a bit in August, as the economy is likely to stabilize and pick up in the third quarter, while a possible rebound in global commodity prices will contribute to higher import values, according to the commentary.

China's trade surplus narrowed 16.8 percent year on year to 25.2 billion US dollars in July, taking the combined trade surplus to 94.1 billion US dollars for the first seven months of the year, according to the GAC.

In the January-July period, total foreign trade reached 2.17 trillion US dollars, an increase of 7.1 percent year on year, lower than the 10-percent growth targeted by the government for the whole of 2012.

Foreign trade has been softening since the beginning of the year, making the annual trade growth goal difficult to achieve, said Liu Ligang, an economist with ANZ National Bank Limited.

Friday's data release came after China announced its lowest inflation rate in 30 months and the slowest industrial output growth since May 2009 in July.

"Looking at all the lackluster figures, we believe Chinese authorities must hasten the loosening of policies to shore up the economy," Liu said.

Faltering exports and a cooling property sector slowed China's economic growth rate to 7.6 percent in the second quarter, the lowest level since the first quarter of 2009.

The central bank has cut its lending and deposit rates twice this year, as well as lowered the amount of funds that banks must keep in reserve, to beef up the monetary supply.

The government has also slashed taxes for small businesses, fast-tracked investment plans to spur growth and subsidized the purchase of energy-saving household electrical appliances.

Top leaders pledged last month to prioritize stable economic growth and adhere to a proactive fiscal policy and prudent monetary policy to weather current economic hardships.

Analysts widely expect that authorities will further reduce the reserve requirement ratio and interest rates to help the economy avoid a hard landing.

Vice Minister of Commerce Gao Hucheng said Friday that the ministry will face pressure in maintaining trade growth in the second half of the year, but at the same time has confidence in exporters' ability to adapt to market changes.

Chinese firms are exerting efforts to develop new products, tap new markets and increase the added value of their exports, which will create great potential for growth in the future, Gao said at a press conference.

The Ministry of Commerce will continue to stabilize trade-related policies and support companies in improving their operations in order to meet the annual trade target, he said.

China's trade with the EU dipped 0.9 percent in the January-July period from a year earlier to 315.8 billion US dollars, the GAC figures showed.

During the period, trade with Japan also slipped 0.2 percent year on year to 190.9 billion US dollars.

Meanwhile, trade with the United States went up 10.5 percent year on year to 271.4 billion US dollars in the first seven months, according to the GAC.

The 10-member Association of Southeast Asian Nations (ASEAN) remained China's third-largest trade partner in the January-July period, with China-ASEAN trade amounting to 220.6 billion US dollars, up 9 percent year on year.

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