Exports fell by 3.1 per cent compared with a year earlier and imports contracted by 0.7 per cent, customs data showed Wednesday. Both were below private sector forecasts of growth in the low single digits.
China's economic growth has slowed this year and is expected to fall further due to weak global demand and an effort by the Chinese central bank to cool a credit boom.
New communist leaders who took power last year say they want to pursue slower, more self-sustaining growth based on domestic consumption, reducing reliance on trade and investment. But some analysts say the latest slowdown might be so deep they could be forced to temporarily reverse course and boost lending or government spending to stimulate growth.
The ruling party's growth target this year is 7.5 per cent, down by almost half from 2007's staggering 14.2 per cent.
"The most likely outcome, in our view, is the Chinese economy going through a period of sluggish growth and adjustment," said UBS economist Tao Wang in a report this week.
Communist leaders have promised to promote private sector businesses that generate most of China's new jobs and wealth but have yet to make major changes.
Retail sales have fallen short of official forecasts and a HSBC Corp. survey of manufacturers showed activity contracted in June for a second month.
Analysts expected China to report slower growth in trade due to a crackdown on misreporting of data by exporters as a way to evade currency controls and bring extra money into the country. But even with that taken into account, Wednesday's figures were below forecasts for exports to rise by up to 3.5 per cent and imports to grow by up to 1.5 per cent.
June's export growth was down from May's year-on-year gain of 13.5 per cent and import growth was down from 8.2 per cent.
China's politically sensitive global trade surplus contracted by 12.4 per cent compared with a year earlier to $27.1 billion. Exports were $174.3 billion while imports were $147.2 billion.
Growth in exports to the United States, China's biggest foreign market, fell to 1.8 per cent from May's 3.5 per cent. Exports to the 27-nation European Union contracted 3.9 per cent.
The trade surplus with the U.S. contracted by 15.5 per cent from a year earlier to $17.5 billion, but still one of this year's highest levels. The surplus with Europe shrank 20.3 per cent to $10.2 billion.
Some private sector forecasters have cut their growth outlook for the year, though to still robust levels above 7 per cent, after a credit crunch hit China's financial markets last month. That came amid a central bank effort to rein in a lending boom regulators worry could spiral out of control.
General Administration of Customs of China: www.customs.gov.cn