China's economy, the world's second largest, struggled in July with a worse-than-expected trade performance as imports plunged 12.5 percent year-on-year, Customs said Monday.

Imports fell to $132.4 billion, data showed, as weaker global commodity prices and lacklustre domestic demand weighed on purchases.

The drop in imports was significantly larger than expectations for a 7.0 percent fall, the median forecast in a survey of economists by Bloomberg News.

Exports also fell in US dollar terms, dropping 4.4 percent to $184.7 billion -- compared with expectations of a 3.5 percent decline.

As the world's biggest trader in goods, China is crucial to the global economy and its performance affects partners from Australia to Zambia, which have been battered by its slowing growth -- while it faces headwinds itself in key developed markets.

July was the fourth month in a row that exports declined in dollar terms, and analysts described the figures as disappointing.

"Signs of stronger manufacturing activity among many of China's key trading partners has so far failed to lift export growth," China economist for Capital Economics, Julian Evans-Pritchard, said in a research note.

"At the same time, the renewed fall in global commodity prices is dragging down import growth," he said.

China's imports have been shrinking since late 2014 with global raw material costs hammered as the country's once blistering expansion lost steam, hurt by manufacturing overcapacity, a slowing property market and mounting debt.

July saw imports fall by the most since February, when they lost 13.8 percent.

"China's trade data was unimpressive in July," ANZ Banking Group said in a research note, which added the outlook for the second half of the year was "challenging".

"Over H2 2016, sluggish growth in Europe and Japan is likely to drag on China's exports. Brexit will further weigh on exports to the EU," it said, referring to Britain's vote to leave the European Union.

- Yuan depreciation -

In the first seven months of the year, total trade volume with the EU -- China's biggest trading partner -- rose 1.8 percent, Customs said in a statement.

Trade with Japan was up just 0.8 percent, but it fell 4.8 percent with the United States, data showed.

China is embroiled in rows over steel exports -- it produces around half the world's output of the metal -- with the EU and US accusing it of dumping. It exported 10.3 million tonnes of steel in July, Customs said, up 5.86 percent year-on-year but down 5.85 percent on June.

But stock investors ignored the weak trade performance, with the benchmark Shanghai Composite index closing up nearly one percent on Monday.

July's fall in exports came despite weakness in China's yuan currency -- also known as the renminbi (RMB) -- which has helped overseas sales by making Chinese goods cheaper.

"Yuan depreciation has helped China's exports to some degree," Citic Bank International chief economist Liao Qun told AFP.

Chinese officials deny the government is deliberately allowing the yuan to slide to boost exports, arguing economic fundamentals are responsible.

China's foreign exchange reserves, already the world's largest, stood at $3.2 trillion in July, down by just $4.1 billion from June, official figures showed Sunday.

The world's number two economy grew 6.7 percent in the second quarter of this year, the same as the first quarter, slowing from all of last year.

The economy expanded 6.9 percent in 2015 -- its weakest in a quarter of a century -- and the government has targeted growth in a range of 6.5-7.0 percent for this year.

Analysts said China will need to further ease monetary policy, such as cutting the amount of funds banks must hold in reserve, to keep growth on track.

"Trade data, especially weak import growth, are further evidence of slowing domestic momentum in July," Nomura's chief China economist Zhao Yang said in a research note.

"We maintain our view of a growth slowdown and accommodative policy bias, given weak domestic demand and still-low albeit stabilising external demand."

China producer deflation eases in July: govt
Beijing (AFP) Aug 9, 2016 - China's producer prices fell at their slowest rate in nearly two years in July, the government said Tuesday, a sign of improving conditions in the world's second largest economy.

The producer price index (PPI), which measures the cost of goods at the factory gate, fell 1.7 percent year-on-year last month, the National Bureau of Statistics (NBS) said, as a rebound in some commodity prices reduced downward pressures.

Protracted declines in the PPI bode ill for industrial prospects and economic growth, as they put off customers -- who seek to delay purchases in anticipation of cheaper deals in future -- starving companies of business and funds.

Chinese PPI has been negative for more than four years but narrowing declines in the last three months have fuelled hopes the country -- a key driver of the world economy -- could be reaching the bottom of a painful slowdown.

The drop was less than the 2.0 percent decline forecast by economists in a Bloomberg News survey, and sharply narrower than the 2.6 percent decline in June.

The improvement in PPI "should benefit the corporate sector's profitability" researchers with ANZ said in a note.

But it will mainly help state-owned enterprises, which dominate heavy industry, they added, so that the impact on private sector investment will be limited.

Producer price inflation should continue to strengthen and will "turn positive" in the second half of 2016 as commodity prices stabilise, they said.

But they warned that until Beijing's plans to cut coal and steel capacity have "made significant progress, the PPI should not stay strong".

Producer prices were helped by steady demand and "lower capacity utilisation" in factories, analysts with CICC Macro noted, adding that "higher PPI indicates continued improvement" in manufacturers' profitability this year.

- Consumer inflation eases -

China's GDP expanded last year at its slowest rate in a quarter of a century as Beijing strives to effect a difficult transition in its growth model away from reliance on exports and fixed-asset investment towards one driven by consumers.

Consumer inflation eased slightly in July, Tuesday's data showed.

The consumer price index (CPI) -- a main gauge of inflation -- rose 1.8 percent on-year, the NBS said, lower than June's 1.9 percent rise but matching expectations in a Bloomberg survey.

Moderate inflation can be a boon to consumption as it pushes buyers to act before prices go up. Beijing is targeting consumer inflation of around 3 percent this year.

A drop in food price inflation dragged on the figures, Julian Evans-Pritchard of Capital Economics said in a commentary, noting a "continued pick-up in broader price pressures" especially in service sectors including health care and education.

"The summer holiday fuelled the seasonal increases in prices of some services," said NBS analyst Yu Qiumei in a statement. Air ticket prices and tourism agency charges rose 12.1 percent and 6.5 percent respectively month-on-month.

Evans-Pritchard said that inflation was likely to rise in coming months but not enough to concern policymakers.

Shanghai stocks were slightly higher by the break Tuesday, edging up 0.29 percent.