A top Chinese official gave reporters a stark picture of the tough challenges that hamper the country's road to recovery, in a news conference called yesterday to explain the latest disappointing export results.

Commerce Vice Minister Fu Ziying acknowledged that China's domestic consumption can't completely offset the losses from falling exports, and he said the declines in trade may be hard to reverse in the short term.

Trade is not likely to rebound soon because the global economic recovery is still distant, the habits of foreign buyers are changing and trade protectionism is on the rise, Fu said.

"There have been no big changes in the three major factors that pose a huge negative influence on China's trade, so it is hard to say whether China's imports and exports can rebound in the second half," Fu told reporters.

Although major powerhouses including the United States, Japan and members of European Union have shown signs of economic improvement, uncertainty still dominates the outlook, Fu said.

The economic meltdown has caused many consumers in the West to become stingy in their spending.

In the US, for example, the savings rate has grown from nearly zero to 6.9 percent. Such changes have affected China's exports to some effect, Fu said.

The US-China trade dispute on tires reflects the trend toward trade protectionism, the vice minister said. US officials claims that Chinese tire exports are harming American manufacturers and workers.

"The accusation by the US is groundless," Fu said, noting that Chinese tire exports to the US tripled from 2004 to 2007 while profits of American tire makers doubled.

TIRE EXPORTS

"It is the global financial crisis that led to the recession in the US tire industry, not Chinese exports," Fu said.

The US has threatened to impose up to a 55 percent increase in tariffs on Chinese tire exports, from 3 percent at present. The decision is to be made next month.

China's overall trade fell 19.4 percent last month from a year earlier to US$200.2 billion. Exports dropped 23 percent and imports decreased 14.9 percent.

Exports extended their losses in July even after the government implemented measures such as export tax rebates, lower administrative fees and extensions of tax payment time limits for exporters.

In the first seven months, China's trade slumped 22.7 percent on an annual basis to US$1.14 trillion yuan. Fu expects trade to total about US$2 trillion this year, compared with US$2.56 trillion last year.

China's gross domestic product grew 7.1 percent year on year in the first half. Investment contributed 6.2 percentage points to the growth while consumption contributed 3.8 percentage points. The falling exports dragged down the figure by 2.9 percentage points.

Fu said the government will continue to carry out support measures for exporters in the second half, reducing their financial burden and helping them to expand their overseas distribution networks.

To cope with rising trade protectionism, China will strengthen dialogues with other countries to seek solutions for these disputes. China will also accelerate the establishment of free trade agreements with other countries and advance cooperation with the World Trade Organization, Fu said.