China's dismal trade numbers for June far underperformed market expectations, with both exports and imports contracting last month against forecasts for a much better performance compared to May.
According to economists, this huge miss in China's trade numbers could be attributed to an underestimation of how severe the slowdown in global demand actually is.
"Markets are underestimating weakness in external demand conditions. The fall in exports is not all about the government's crackdown on over-invoicing," Junwei Sun, Beijing-based economist at HSBC told CNBC on Wednesday, referring to the government's efforts to prevent export firms from overstating theirbusinesses in order to bring funds into the country and surpass capital restrictions.
(Read More: China Trade Data Underscores Growth Worries)
China's exports in June fell 3.1 percent from a year ago, marking the first decline since January 2012. The figures were a major miss against Reuters' expectations for a rise of 4 percent. Exports climbed 1 percent in May.
Imports were down 0.7 percent year on year in June, compared to a forecast of a rise of 8 percent, and worse than the 0.3 percent drop in May.
According to Sun, sluggish external demand is no longer limited to G-3 economies, with emerging markets also becoming a source of weakness.
(Read More: The Risk That Markets Aren't Fully Bracing For)