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China sees export threat from Brazil, India monetary tightening

world Updated: Jul 20, 2010 18:11 IST

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Monetary tightening in India and Brazil may add to Europe's sovereign-debt crisis in curbing demand for China's exports, a Chinese official said.

The outlook for trade is "complicated and difficult," Yao Jian, a spokesman for the Ministry of Commerce, said at a press briefing in Beijing on Tuesday.

Caps on global demand could exacerbate a slowdown in economic growth in China, the world's No 1 exporter, increasing the likelihood of Premier Wen Jiabao easing policies and limiting gains by the yuan. A government research body said that second-half export gains would slow to less than half the pace of the first six months.

Demand may be restrained by Europe's woes, the gradual end of post-crisis restocking by businesses and tightening in emerging economies such as India and Brazil, Yao said.

In Brazil, the central bank has lifted the benchmark lending rate, known as Selic, to 10.25 per cent from a record low of 8.75 per cent in April. Traders are betting on another half percentage point increase this week. India's next monetary policy decision is due on July 27.

Economic growth in China is cooling after the government tempered credit growth and investment spending and cracked down on real-estate speculation. Gross domestic product expanded 10.3 per cent in the second quarter, down from 11.9 per cent in the first, the government reported last week.

Export gains may cool to 16.3 per cent in the second half from a year earlier, the China Securities Journal reported on Monday, citing a State Information Centre report. That would be down from 35 per cent in the first half.

The information centre, a research body under the National Development and Reform Commission, cites the removal of tax rebates, weaker demand because of Europe's debt crisis and comparisons with higher base levels.

The commerce ministry and the ministry of industry and information technology both highlighted on Tuesday pressures on Chinese businesses from rising labour and raw-material costs.

Still, the nation won't face an economic double-dip and industrial-output growth, while slowing in the second half, will exceed the government's 11 per cent full-year target, Zhu Hongren, the industry ministry's chief engineer, said at a briefing in Beijing today.

Wages in the Yangtze River Delta and Pearl River Delta increased by between 20 per cent and 25 per cent this year, Zhu said.