China exports fall as lower EU demand hurts growth

China's exports declined more than expected in July, hobbled by a strong yuan and lower demand in the European Union, and adding pressure on Premier Li Keqiang to stabilise growth.

Overseas shipments fell 8.3 percent from a year earlier in dollar terms, the customs administration said. The reading was well below the estimate for a 1.5 percent decline in a Bloomberg survey and compared with an increase of 2.8 percent in June. Imports dropped 8.1 percent, widening from a 6.6 percent decrease in June, leaving a trade surplus of $43 billion.

Along with weak domestic investment, subdued global demand is putting China's 2015 growth target of about 7 percent at risk. The government has rolled out fresh pro-expansion measures, including special bond sales to finance construction, but has held off weakening the yuan as China seeks reserve-currency status.

"Exports are no longer an engine for China growth - no matter what the government does, it's just impossible to see strong export growth as in the past," said Bank of Communications economist Liu Xuezhi. "It means additional slowdown pressure, and it requires the government to be more aggressive in the domestic market."

Liu said China is likely to accelerate infrastructure spending as fixed-asset investment is the "the most immediate and effective" way to stimulate growth.

China's exports to the European Union fell 2.5 percent in the first seven months of 2015 from a year earlier, while shipments to Japan dropped 10.5 percent. One bright spot was exports to the US, which expanded 9.3 percent.

The slump in exports "compounds downward pressure on China's economy and threatens to bring exchange rate depreciation onto the table as a tool to restore competitiveness," Tom Orlik, chief Asia economist at Bloomberg Intelligence, wrote in a research note on Saturday.

The People's Bank of China has adopted a vice-like grip on the yuan, allowing little movement of the currency in the onshore market. exchange rate ended a decade ago.