BEIJING — Chinese policymakers face mounting pressure to support economic growth after an unexpectedly large drop in exports last month and the steepest decline in producer prices in almost six years.
China's producer-price index fell 5.4 per cent year on year in July, based on National Bureau of Statistics data released yesterday.
The decline — the biggest since October 2009 — came on the heels of trade data on Saturday that showed exports last month shrank 8.3 per cent from a year earlier, compared with an estimated decline of 1.5 per cent.
The data indicated weak demand for Chinese factory products both at home and abroad, and suggested that interest-rate cuts and efforts to stabilise local government finances have yet to spark a recovery.
The People's Bank of China (PBOC) has lowered interest rates four times since November to support an economy expected to grow this year at the slowest pace since 1990.
"The goal this year is to sustain growth, so policies will continue to stimulate demand," said Mr Zhou Hao, an economist at Commerzbank AG in Singapore.
Maintaining an economic expansion of about 7 per cent poses a challenge because the financial sector cannot be expected to surge in the second half like it did during the recent stock-market boom, Mr Liu Ligang and Mr Louis Lam, analysts at Australia and New Zealand Banking Group, wrote in a note.
Chinese stocks have lost almost US$ 4 trillion (S$ 5.54 trillion) in market value since their mid-June peak.
"Monetary policy will need to become more supportive," the analysts said. They forecast another interest-rate reduction this quarter, as well as a cut of 50 basis points to the portion of deposits that lenders must hold in reserve.
Also weighing on growth prospects is a yuan that has maintained its strength against the US dollar as other major currencies depreciate.
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