Feb. 9 (Bloomberg) -- China’s exports probably fell by the most in a decade in January as demand dried up in the U.S. and Europe, making it harder to revive growth in the world’s third- biggest economy.

Shipments tumbled 14 percent from a year earlier, the third straight monthly decline, after falling 2.8 percent in December, according to the median forecast of 15 economists surveyed by Bloomberg News. The figure is due Feb. 11.

Consumer sentiment in Europe, the nation’s biggest export market, declined to a record low in January in the face of the worst recession since World War II. China’s slumping exports and weakest economic growth in seven years have cost the jobs of 20 million migrant workers, damped confidence and discouraged investment.

“A recovery in global demand is looking even more remote,” said Isaac Meng, a senior economist at BNP Paribas SA in Beijing. “The implications for China’s industrial sector are severe because exports account for close to 20 percent of industrial output.”

Imports plunged 25.4 percent, the most since Bloomberg data began in 1995, leaving a trade surplus of $29 billion, according to the survey. The slump was likely exacerbated by a week-long Lunar New Year holiday, which fell in January this year and February last year.

Rising protectionism may make it “even more difficult for China to have an export recovery any time soon,” Meng said. He cited “Buy American” provisions in a U.S. stimulus package and Treasury Secretary Timothy Geithner’s comment last month that China is “manipulating” its currency.

Cooling Inflation

The eastern manufacturing city of Shenzhen is among those worst affected by the slowdown. DeCoro, one of the world’s largest leather-furniture makers with 2,000 employees in China, shuttered its factory in the city last month, the Shenzhen Daily reported Feb. 5.

Inflation is cooling along with the economy.

Consumer prices may have climbed 0.8 percent in January, the slowest pace in almost three years, leaving more room for interest-rate reductions, the survey showed. Producer prices may have fallen 2.6 percent, the biggest decline in more than six years. Those figures are due tomorrow.

The central bank may keep cutting rates and the amount of money that banks are required to hold as reserves to boost domestic demand and stem expectations of deflation.

The key one-year lending rate may fall to 3.96 percent from 5.31 percent and the reserve ratio for the nation’s biggest banks to 9 percent from 15.5 percent, according to JPMorgan Chase & Co.

Lending Surges

The decline in trade may contrast with a surge in lending and money supply as the government rolls out a 4 trillion yuan ($585 billion) stimulus package and pressures mainly state-owned banks to lend.

M2, the broadest measure of money supply, will climb 18.4 percent in January from a year earlier, according to the survey. That would be the fastest pace in a year and above the government’s 17 percent target for 2009.

A record 1.2 trillion yuan of new loans in January, reported by the official China Securities Journal, and two monthly increases in a manufacturing index, are tentative signs that the economy may revive, some economists say.

“Manufacturing in China is still contracting, but the bottom is now in sight,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney.

Stocks Climb

The Shanghai Composite Index of stocks has climbed about 20 percent this year, after falling 65 percent in 2008, on expectations that stimulus measures, including support plans for industries from steel to textiles, will revive growth.

“China’s growth will be V-shaped in 2009 with the bottom already reached in the fourth quarter of last year,” said Sun Mingchun, an economist with Nomura Holdings in Hong Kong.

China’s economy expanded 9 percent in 2008 after a 13 percent gain in 2007 that pushed it past Germany. In the fourth quarter of last year, growth cooled to 6.8 percent, the weakest pace since 2001, on the export decline and a slump in property.

China’s waning demand for raw materials and parts to manufacture exports is dragging down other economies in the region, driving South Korea, Australia and Taiwan closer to recessions.

Korea’s exports to China, its biggest market, tumbled 32.2 percent during the first 20 days of January.

To contact the reporters on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

Last Updated: February 8, 2009 11:00 EST