China’s trade outlook for 2012 is worsening, weighed down especially by growing problems in Europe, the Commerce Ministry said on Thursday as it disclosed the longest run of falling growth in inward investment in the economy since the 2008-9 financial crisis.
The ministry singled out problems in the European Union – China’s biggest overseas market – as the core difficulty for exporters. It published data showing foreign direct investment from Europe fell 2.7 percent year-on-year, to $4 billion, in the first seven months of 2012.
“Right now, the sharp drop of exports to E.U. countries is the biggest important factor weighing on China’s export growth,” a ministry spokesman, Shen Danyang, said at a news conference.
“With the European debt crisis spreading and the global economy recovering at a slower than expected pace, we expect China’s trade situation in the second half will become more severe and we are facing more pressure to meet the annual target for trade growth,” Shen added.
China aims to expand total trade by an average of 10 percent in 2012, but shipments have been volatile so far this year.
Data published this month showed China’s exports to the European Union sank 16.2 percent year-on-year in July, to $29.4 billion.
July export growth over all virtually stalled, up just 1.0 percent from a year ago versus the consensus estimate in a Reuters poll of an 8.6 percent expansion. Import growth was 4.7 percent year-on-year in July against expectations of 7.2 percent.
China’s economy expanded at its slowest pace in more than three years in the second quarter, up 7.6 percent from 2011 as demand at home and abroad slackened.
As exporters battle with a global economic slowdown, the drop in inward investment is doubly worrying for investors because around 200 million jobs in the country are oriented toward the external sector, and fixed-asset investment generates about half of China’s economic output.
The Commerce Ministry said China drew $66.7 billion in foreign direct investment between January and July, down 3.6 percent from the comparable period a year earlier. July’s inflow alone was $7.6 billion, down 8.7 percent year-on-year.