China trade slumps more than expected in July

(Sharecast News) - China's imports and exports slumped further than expected last month, official data showed on Tuesday, reflecting a stagnating recovery in the world's second-largest economy and increasing pressure on Beijing to provide more stimulus. Imports in July fell 12.4% year-on-year, much worse than the 5.6% forecast by economists. Exports also fell faster than expected, contracting by 14.5%, after June's 12.4% fall.

The trade surplus rose to $80.6bn in July from $70.6bn against a consensus of $70.0bn.

"China's exports are likely to continue falling in H2, as the U.S. is likely to enter a mild recession, while the Eurozone economy probably will remain weak," said Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics.

"Exports are now falling in all of China's significant markets, except Russia, meaning that China will need to rely more on domestic demand to stabilise growth in H2. But China is opting for only a limited stimulus, largely focused on supply-side measures, though also including tax cuts for SMEs and an incremental loosening of city-level property policies, such as mortgage terms."

"Policymakers appear determined to allow household spending and business investment to take the lead in this recovery cycle, even if that means a drawn-out, tortuous upturn."

Reporting by Frank Prenesti for Sharecast.com