China Sees Export Threat From Brazil, India Monetary Tightening

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 today.

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 forecasts second-half export gains will 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 percent from a record low of 8.75 percent in April. Traders are betting on another half percentage point increase this week. India’s next monetary policy decision is 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 percent in the second quarter, down from 11.9 percent in the first, the government reported last week.

Export Growth Slowing

Export gains may cool to 16.3 percent in the second half from a year earlier, the China Securities Journal reported yesterday, citing a State Information Center report. That would be down from 35 percent in the first half.

The information center, 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 today pressures on Chinese businesses from rising labor 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 percent 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 percent and 25 percent this year, Zhu said.