BEIJING -- China's foreign trade this year faces situations "far from optimistic" due to thwarted global demand, rising costs at home and a harsh trading environment, according to an official report released Friday.

After trade growth slowed for a second consecutive quarter in the January-March period, China's trade will continue to grow at a slow pace in the second quarter and the annual rate will drop from that of 2011, the Ministry of Commerce (MOC) said in an online statement.

In the first quarter, China's imports and exports expanded 7.3 percent from a year ago to reach $859.37 billion, according to the General Administration of Customs.

The growth rate was 22.3 percentage points lower than that of a year ago and marked the slowest pace since the fourth quarter of 2009.

THE ROSY SIDE

"Considering both the international and domestic environments, there are certain advantages and positive factors for maintaining steady trade growth, but 2012 is going to be an extremely challenging year for China's foreign trade," the statement said.

Since the beginning of this year, the global economy has shown some positive signs, said the ministry, citing examples such as better-than-expected economic growth in the United States and Japan, the European debt crisis being contained to some extent and strong measures taken by emerging economies to spur economic growth.

Domestically, China's economic situation is basically sound, as its economy expanded steadily in the first quarter and market confidence remained stable, the MOC said.

China's economy expanded 8.1 percent year on year in the first quarter, marking the fifth consecutive quarterly decline and the slowest growth pace since the third quarter of 2009, data from the National Bureau of Statistics (NBS) shows.

"The growth of the economy still has great potential and there is a relatively large amount of leeway for macroeconomic regulatory policies," according to the statement.

NO SMOOTH SAILING

However, China should clearly understand that trade development is facing mounting challenges and complicated constraints, and "the situations are far from optimistic," the ministry said.

A major problem is seriously withering global demand due to weak world economic growth, especially in the European economy that is on the verge of a recession, it said.

The International Monetary Fund forecast that the world economy will grow by 3.5 percent this year and total trade will expand by 4 percent, 0.4 and 1.8 percentage points lower than the previous year, respectively.

China's export companies have felt the strain, as they are receiving far fewer orders than in the same period last year, according to the MOC.

Adding to the woes, domestic companies are also experiencing higher costs of labor and raw materials, which is cutting into their profitability and increasing operating pressures.

Urban workers' incomes have risen by an average annual rate of 33 percent during the past three years, and minimum wage standards in most regions rose by more than 20 percent in the past two years.

"China's small and mid-sized enterprises still face prominent difficulties in getting loans, and those that can get loans said the costs are quite high," said the ministry.

The ministry also pointed out that the country is facing a relatively harsh trade environment, as "China has encountered the most trade frictions in the world for 17 consecutive years."

"In the first quarter, other countries launched 16 trade-remedy investigations for Chinese products involving a total value of 3 billion U.S. dollars," the MOC said.

The number of such cases surged 80 percent over the same period last year, while the total value involved jumped 140 percent, it said.