By Joe Cash

BEIJING China's exports likely contracted further in July, as manufacturers in the world's second-largest economy struggled for buyers in markets grappling with high inflation and rising interest rates, a Reuters poll showed on Monday.

Data for July are expected to show a 12.5% fall in outbound shipments from a year earlier, following a drop of 12.4% in June, according to the median forecast of 28 economists in the poll.

That would be the worst reading since the early days of the pandemic in February 2020, when exports fell an annual 17.2%, as strict COVID curbs and lockdowns across the country resulted in workers laying down their tools.

Chinese factory activity fell for a fourth straight month in July, threatening growth prospects for the third quarter and increasing pressure on officials to deliver promised policy measures to boost domestic demand, with the services and construction sectors teetering on the brink of contraction.

China's state planner hinted of stimulus over three press conferences convened last week, but investors were underwhelmed by proposals to expand consumption in the automobile, real estate and services sectors as well as extend loan support tools for small and medium-sized enterprises until the end of 2024.

As many of China's major markets grapple with higher borrowing costs amid a battle to bring down soaring inflation, authorities in Beijing are walking a tight rope in trying to boost domestic consumption without easing monetary policy too much lest it triggers large capital outflows.

Imports are expected to have shrunk by 5.0%, after a fall of 6.8% in June, reflecting slightly improved domestic demand.

But South Korean exports to China, a leading indicator for imports to the Asian giant dropped 25.1% in July from a year earlier, the sharpest in three months.

The median estimate in the poll indicated only marginal change in China's trade surplus, with analysts predicting it will come in at $70.60 billion, compared with 70.62 billion in June.

China's trade data will be released on Tuesday.

(Reporting by Joe Cash; Polling by Anant Chandak and Susobhan Sarkar in Bengaluru; Editing by Shri Navaratnam)