BEIJING • China's exports and imports fell more than expected last month in a rocky start to the third quarter, pointing to further weakness in global demand in the aftermath of Britain's decision to leave the European Union.
Imports fell 12.5 per cent from a year earlier, the biggest decline since February, suggesting that China's domestic demand may be faltering despite a flurry of measures to stimulate economic growth.
Exports fell 4.4 per cent year-on-year, the General Administration of Customs said yesterday, adding that it expects pressure on shipments to start to ease in October.
"I think (the drop in imports) is mainly from the demand side," said Mr Ma Xiaoping, an economist at HSBC. Government efforts to cut overcapacity could produce an even bigger hit to demand in the next few quarters, he added.
As the world's biggest trader in goods, China is crucial to the global economy, and its performance affects partners from Australia to Zambia, which have been battered by its slowing growth - while it faces headwinds itself in key developed markets.
July was the fourth month in a row that exports declined in dollar terms, and analysts described the figures as disappointing.
"Signs of stronger manufacturing activity among many of China's key trading partners have so far failed to lift export growth," China economist for Capital Economics, Mr Julian Evans-Pritchard, said in a research note. "At the same time, the renewed fall in global commodity prices is dragging down import growth," he said.
China's imports have been shrinking since late 2014, with global raw material costs hammered as the country's once-blistering expansion lost steam, hurt by manufacturing overcapacity, a slowing property market and mounting debt.
July saw imports fall by the most since February, when they declined by 13.8 per cent.
"China's trade data was unimpressive in July," ANZ Banking Group said in a research note, which added that the outlook for the second half of the year was "challenging".
"Over H2 2016, sluggish growth in Europe and Japan is likely to drag on China's exports. Brexit will further weigh on exports to the EU," it said, referring to Britain's vote to leave the European Union.
In the first seven months of the year, total trade volume with the EU - China's biggest trading partner - rose 1.8 per cent, Customs said in a statement.
Trade with Japan was up just 0.8 per cent, but it fell 4.8 per cent with the United States, data showed.
China is embroiled in rows over steel exports - it produces around half the world's output of the metal - with the EU and US accusing it of dumping. It exported 10.3 million tonnes of steel last month, Customs said, up 5.86 per cent year-on-year but down 5.85 per cent on June.
"Trade data, especially weak import growth, is further evidence of slowing domestic momentum in July," Nomura Group's chief China economist Zhao Yang said in a research note. "We maintain our view of a growth slowdown and accommodative policy bias, given weak domestic demand and still-low, albeit stabilising, external demand."
REUTERS, AGENCE FRANCE-PRESSE