China’s customs spokesman Zheng Yuesheng has described the recently released June trade figures as “grim” as the nation surprised analysts by posting a significant decline in trade. Economists had been expecting exports to increase by 4 percent and imports to rise by 8 percent yet the figures showed a year on year decrease of 3.1 percent and .7 percent respectively.

“China faces relatively stern challenges in trade. Exports in the third quarter look grim,” commented Zheng.

He explained that the decrease has been caused by several factors, including the continuous low demand from foreign markets, increase in foreign exchange and labor costs and the frequent occurrence of trade friction with other nations. Furthermore, Zheng cited the slowing down of domestic industrial production, which suppresses the demand for the import of raw materials, in conjunction with the decreasing average import price of raw materials such as crude oil, coal and iron ore as key factors affecting the June trade figures.

The customs data showed that exports to the United States, China’s largest export market, fell by 5.4 percent year on year, while exports to the European Union decreased by 8.3 percent year on year. However, China did record a trade surplus of $27.1 billion in June which was largely in line with the $27 billion anticipated by many analysts.

Growth in China is expected to slow to 7.5 percent this year.

This story first appeared at Asia Briefing, July 11, 2013.