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News - Editor, 15 August 2012

China’s July Exports Confirm Slow Down in Economic Growth



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As the world's biggest exporter, China has been negatively impacted by ailing overseas economies, most notably debt-riddled Europe which is a key trading partner. July statistics reveal that exports to Europe for the first seven months of 2012 fell 3.6 percent to US$192.4 billion, compared with the same period last year. Shipments to the United States, on the other hand, rose 11.4 percent to US$195.4 billion for the seven month period. China's overall export figures revealed a growth of 1 percent in July, as opposed to the 11.3 percent increase experienced in June. With figures decidedly below expectations, concerns that China's economy is slowing down despite government strategies to stimulate growth, caused a worldwide slump in markets.

Although China's government has already slashed interest rates twice this year, along with lowering requirements for bank reserve funds, analysts have noted that the export data is likely to put pressure on the government to loosen policies even further. Authorities may take advantage of the slowdown in consumer price inflation for the fourth straight month to adjust monetary policy and possibly boost the economy.

Industrial production measuring output at China's workshops, factories and mines, along with retail sales as the primary measure of consumer spending, both slowed significantly in July. Moreover, fixed-asset investment, indicating expenditure on infrastructure, rose 20.4 percent for the first seven months year-on-year, which fell below expectations.

A further cooling in China's property market, likely related to restrictions on buying second homes and higher minimum down-payment requirements put a damper on investment. China's central bank also experienced a downward trend as bank lending dropped 41.3 percent in July, compared with June.

Prior to the release of July's data, China Vice Commerce Minister Gao Hucheng told reporters that China faces a challenge to meet its growth target of 10 percent in the second half of the year. This echoed the sentiments of Commerce Minister Chen Deming in June when he noted that China would be 'lucky' to achieve the 10 percent target.

Both Taiwan and South Korea have also reported declining export figures, with the latter's July exports being the worst in almost three years. Hong Kong decreased its full-year growth forecast from 1-3 percent to 1-2 percent, drawing attention to continuing risks in the global economy.

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