China export growth slows to 1%

By Joe Mcdonald ,AP

BEIJING — China’s trade and domestic demand have weakened even faster than expected, adding to pressure on Beijing for a more aggressive stimulus to boost the world’s second-largest economy out of its worst slump since the 2008 crisis.

Export growth in July plunged to just 1 percent from the previous month’s 11.3 percent, well below forecasts of about 5 percent, data showed Friday. The slump adds to the pain for struggling exporters, raising the threat of more job losses and unrest as the Communist Party tries to enforce calm ahead of a handover of power to younger leaders.

Factory production, auto sales and retail sales in July, reported Thursday, also were more anemic than expected despite two interest rate cuts since the start of June and government efforts to pump money into the economy through spending on public works.

“With the export sector losing speed faster than expected, the government’s current investment stimulus plan looks woefully inadequate,” IHS Global Insight analyst Alistair Thornton said in a report. “The government is likely to respond by ramping up its stimulus efforts, with both monetary and fiscal guns firing.”

The plunge in export demand has hammered manufacturers that employ millions of workers to supply the world with low-cost shoes, toys, furniture and consumer electronics. Thousands of smaller companies have been forced into bankruptcy.

“It is getting more and more difficult for export industries, especially in the past two months — a sharp decline, fewer orders,” said the boss of a furniture manufacturing company in Fujian province on China’s southeastern coast. He would give only his surname, Lin.

Economic growth fell to a three-year low of 7.6 percent in the quarter ending in June — well above U.S. and Japanese rates in the low single digits but painful for Chinese companies that depend on high growth.

Analysts are forecasting a rebound later this year but say it could come later and be weaker than previously thought.

The slowdown is bad news for economies that are looking to China’s demand for oil, iron ore and other imported commodities and rising consumer spending to drive global growth.

Import Growth Also Falls Also in July, import growth fell to 4.7 percent from the previous month’s 6.3 percent, also below forecasts.

Growth in industrial production weakened to 9.2 percent over a year earlier from June’s 9.5 percent, its lowest rate since May 2009.

Retail sales growth slowed to 13.1 percent from the previous month’s 13.7 percent. That is a setback for government efforts to reduce China’s reliance on exports and investment by boosting domestic consumption.

Wen, the premier, said last month that supporting investment would be the dominant element of the stimulus, an acknowledgement that consumer spending was failing to grow fast enough.