China’s August Trade Surplus Widens As Exports, Imports Disappoint

China reported a trade surplus of $26.66 billion in August amid the slower-than-expected growth in exports and imports, raising concern that the world's second largest economy isn't doing enough to stimulate the economy and avert a slowdown.

The customs data released Monday show that the exports advanced just 2.7 percent in August compared to that in the same month last year, up from 1 percent in June. Imports dropped 2.6 percent in August compared to that in the same month last year, down from 4.7 percent rise in July.

The report comes after it was announced Sunday that the rate of inflation in China rose in August from the previous month. Data from the National Bureau of Statistics showed Sunday that the consumer price index of China rose two percent in August from a year earlier, up from 1.8 percent in July.

Earlier, Beijing said that China's consumer price inflation target for the year would be around four percent. The inflation being less than the target should be good news because it can help the government invigorate growth without much concern about the rising prices.

Meanwhile, China's industrial production grew at a reduced pace in August compared to July, indicating that the weakening global demand and the debt burden faced by the euro zone are adversely affecting the country's economy. The data released Sunday by the National Bureau of Statistics showed that China's industrial production rose 8.9 percent in August compared to that in the same month a year ago, down from the 9.2 percent increase in July.

There have been fears of a hard landing after data showed earlier last month that China's economy slowed down to 7.6 percent in the second quarter, down from 8.1 percent in the first quarter. Beijing is targeting a growth rate of 7.5 percent this year. In 2011 and 2010, the economy grew by 9.2 percent and 10.4 percent, respectively.

The continuing debt crisis in Europe and the tentative U.S. recovery have hurt the demand for exports, the key driver of China's economy. The IMF has warned that the escalation of the euro zone debt problems could slash China's 2012 GDP growth in half.

Markets worry that China's investment-driven economic model, though successful for decades, is no longer seen as sustainable with the consensus that reforms will be needed to prevent a sudden downturn.