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Itochu sees China economy under pressure from weak exports, spending

[TOKYO] Japanese trading house Itochu Corp expects slumping exports and consumer spending will put the Chinese economy under more strain, Chief Financial Officer Tsuyoshi Hachimura said on Tuesday.

He added that the world's second-biggest economy was expected to recover gradually towards the end of this year on the back of the government's stimulus measures.

"We are concerned about regional construction and real estate markets, municipal bonds owned by regional government, and high volatilities of Chinese stock market," Mr Hachimura told a news conference on its earnings.

"But we believe Chinese government will take measures steadily. Though their monetary easing and deregulation have not given enough stimulus to its economy, we expect the condition will gradually improve toward the end of this year," he said.

Itochu has the biggest exposure to China among the top Japanese trading firms, due to its joint investment in China's CITIC Ltd with Thailand's Charoen Pokphand Group.

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Itochu and Charoen Pokphand said in January they will invest $10 billion in CITIC, part of China's oldest and biggest conglomerate. The investment is the biggest ever by Itochu.

Hachimura said Itochu's business in China has not been adversely affected by the country's economic slowdown in the April-June quarter as its operations are centered on textiles, food and other consumer goods.

Itochu reported a 50 per cent rise in net profit to 121 billion yen (US$976.04 million), a record for any quarter, as healthy earnings from pulp and tyre operations more than offset slack profits in energy and metals.

It kept its annual profit forecast of 330 billion yen.

"Theoretically, there is room for us to raise our forecast. But we want to see how our businesses progress in the second quarter since we've only finished the first quarter," he said.


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