China’s trade surplus dropped 10% on the year in July

China’s trade surplus dropped 10% on the year to around 263.0 billion yuan ($43.1 billion) in July, according to the customs administration.

Chinese exports fell much more than expected, down 8.9% year-on-year to 1.19 trillion yuan. Imports fell 8.6% to 930.2 billion yuan.

Exports in the country have been affected by a strong yuan and weak demand in the European Union. Exports to the European Union dropped 12% in July compared to last year, while exports to Japan dropped 13%, and exports to the U.S. fell 1.35%.

Li Miaoxian, a Beijing-based economist at Bocom International Holdings Co., told Bloomberg News that “the yuan has been stronger against the euro, and it’s hurting Chinese exports to Europe,”

The weak foreign-trade performance, along with less-than-expected domestic investment, is putting the country’s 2015 growth target of about 7 percent at serious risk.

Oversea shipments dropped 8.3% from the same time last year, the Chinese customs administration said.

China’s economy is expanding at the weakest rate in decades

Last year the Chinese economy only expanded by 7.4% – the weakest year in over two decades.

This year growth has subdued even more, expanding by only 7.0% in each of the first two quarters.

Liu believes that China may pump more spending on infrastructure spending as fixed-asset investment is “the most immediate and effective” way to help drive economic growth.

The government is also doing what it can to help stimulate China’s trade sector. It has provided tax breaks, cut red tape, and reduced import duties.

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