Europe continues to cut its cloth, and China's economy is feeling the pinch

The United States replaced Europe as China's largest export destination in the first half of this year, and analysts are concerned that trade with Europe will only worsen over the rest of the year.

From January to June, China's exports to the EU fell 0.8 percent from a year earlier to $163.06 billion (133 billion euros), while imports rose 3.3 percent to $104.76 billion. The trade surplus shrank to $58.3 billion, 7.6 percent less year-on-year, according to the General Administration of Customs.

"Major export destinations in the EU are overwhelmed with the debt crisis, which has brought high unemployment and rolled back consumption," said Zheng Yuesheng, head of the statistics department of the General Administration of Customs, at a news conference. "China's exports to Germany, France and Italy have been falling continuously."

In the first six months of the year, exports to Germany fell 3.9 percent year-on-year to $33.98 billion, while exports to France fell 5.3 percent to $13.56 billion, and exports to Italy fell 24.2 percent to $13.34 billion.

"Italy is implementing an ambitious agenda of fiscal and structural reforms," said Kenneth Kang, mission chief of the International Monetary Fund. "Despite these efforts, the country remains vulnerable to the euro area crisis."

Li Jian, a researcher with the International Trade and Economic Cooperative Research Institute, a think tank affiliated to the Ministry of Commerce, says that with the recession in the EU, there would be no growth in China's exports to the EU in the coming months.

"It is hard for the EU to recover in a short time, and even as it eventually does, it will take a long time for demand from European countries to recover."

Chinese exporters, especially those in the textiles industry, would be better off turn their attention to other markets, he says.

Shen Yan is general manager of Top Wedding Dress Factory in Suzhou, Jiangsu province. The company is export-oriented and has been hit hard by the European debt crisis.

"Italian clients used to account for a large amount of my business, but now most of them are no longer in contact," he says.

Shen says September and October are peak seasons for weddings so this time of year should be the busiest.

"But this year's orders for the second quarter are barely one-third of what they were last year."

Because of rising production costs and falling orders from Europe, Shen says, he has laid off half of his work-force and moved to a smaller workshop.

"The textile industry is having a hard time of it this year, and things are even worse for the wedding dress business, given that we are not dealing in daily necessities."

The China National Textile and Apparel Council says the country's textile exports fell 24.47 percent year-on-year in the first five months of this year, and it predicts further falls.

In the first half of the year the country's total exports grew 9.2 percent year-on-year to $954.38 billion, and imports rose 6.7 percent, to $885.46 billion. Total trade grew 8 percent, 2 percentage points lower than expected.

Zheng says: "What happens with the eurozone debt crisis is pivotal to what happens to China's trade figures for the rest of the year. If the global economy, especially the European debt crisis, does not worsen in the coming months, it is possible trade could grow 10 percent."

However, Li says he feels pessimistic about a eurozone recovery this year, because no effective measures are being taken.

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