China's exports in sharp decline

China's exports are declining as world demand slows

Chinese exports plunged by more than a quarter in February from a year ago as the world's third-largest economy was hit by a drop in demand for its goods.

Exports dropped by 25.7% to $64.9bn (£47.3bn) compared with the same month a year earlier, while imports fell by 24.1% to $60.1bn, figures showed.

The country's trade surplus stood at $4.8bn in February, compared with $39.1bn the month before.

The dramatic drop in exports came as a surprise to many analysts.

"This is clearly worse than expected. We were looking for a rise of 1.2%," said Robert Subbaraman at Nomura International.

'Grim picture'

The continuing global economic downturn means that demand for Chinese goods around the world will continue to suffer, according the Chinese government.

The Chinese commerce minister said that the export slump is unlikely to end soon, warning of a "grim picture" for trade in the coming months.

"Exports will get worse before they get better. We could see contractions of up to 30%," said Ben Simpfendorfer at RBS.

"I do think the economy will struggle to bounce back," he added.

"The export figure is set to stay in the red so long as the major economies around the world remain in recession," agreed Sherman Chan at Moody's.

The drop in demand overseas has already caused a wave of factory closures and increased unemployment.

Boosting demand

These latest figures will increase pressure on the Chinese government to push through its stimulus package to boost domestic demand, analysts said.

It has already approved a plan of tax cuts and infrastructure spending worth 4 trillion yuan ($586bn).

And figures show that China's investment in roads, railways and power grids rose by 26.5% in January and February compared with the same months last year.

But such massive government spending may not be enough to stimulate the country's economic growth in the near term.

"There is no way the fiscal stimulus can prop up growth until the the second half of the year. The fall in private sector demand is too sharp," said Mr Simpfendorfer.

Premier Wen Jiabao has announced a target of 8% growth for China's economy in 2009, but many analysts believe the figure will be closer to 5%.