Business News : China says Q2 trade growth to stabilize at "low level"

BEIJING (Business News) - China's trade growth in the second quarter should stabilize at a "low level", the Commerce Ministry said on Friday in a regular spring assessment of business conditions that cautioned tough times ahead.

Without predicting when trade flows would recover, the ministry said the world's second-biggest economy still faced considerable headwinds and that price pressures were building despite slackening activity.

But it noted that the Chinese economy, which grew at its slowest annual pace in nearly three years at 8.1 percent in the first quarter, was supported by good fundamentals.

"There are some favorable factors to ensure steady growth in trade, but we should also note that the year of 2012 may be a quite challenging one for China's trade," the ministry said in its assessment, posted online.

"China's external trade growth is likely to stabilize at a relatively low level in the second quarter."

China has set a 10 percent growth rate for exports and imports in 2012, but both targets were missed in Marc h, with imports expanding just 5.3 percent from a year earlier while exports grew 8.9 percent.

The ministry says it is confident of hitting its target.

Hurt by a recession in Europe and a patchy economic recovery in the United States - China's two biggest trading partners -export sales growth has slumped to single-digit levels this year, a long way from growth of over 20 percent seen in 2010 and the first-half of 2011.

Worse, rising domestic labor costs and higher raw material prices are squeezing the competitiveness of Chinese exporters as well, the ministry said.

A separate survey released by China's statistics agency showed the 159-million-strong migrant workforce saw an average salary increase of 21.2 percent in 2011 from a year earlier.

"China's trade growth in 2012 will grow at a stable pace, which is expected to be lower than in 2011, and the trade balance will be further improved," the ministry said.

It noted that global oil prices could climb on the back of geopolitical tensions in Iran and Syria.

"Uncertainties hanging over Syria and the unfolding Iran nuclear crisis could increase the risk of higher oil prices," it said.

China posted a trade surplus of about $ 25 billion in the first quarter, accounting for just 1.4 percent of its gross domestic product, half last year's proportion and well below the 10.1 percent seen in 2007.

But the country's overall trade sector dragged on the economy in the first quarter, with net exports subtracting 0.8 percentage points from Chinese economic growth.