China's exports in June unexpectedly declined, adding to the slowdown in the world's second-largest economy as the new leadership strives for economic transformation and upgrading.

Meanwhile, a decrease in imports in June suggested little improvement in domestic demand amid credit tightening and manufacturing overcapacity.

Exports in June dropped 3.1 percent from a year earlier to $174.32 billion, the most since October 2009, while imports edged down 0.7 percent year-on-year to $147.19 billion, the General Administration of Customs said on Wednesday. Overall foreign trade shrank 2 percent year-on-year to $321.51 billion in June with a trade surplus of $27.13 billion.

Exports in May rose 1 percent from a year earlier and imports fell 0.3 percent.

"Exports and imports eased remarkably in the first half of this year and the picture is especially pessimistic in May and June," Zheng Yuesheng, a spokesman for the customs agency, told a news conference on Wednesday. "The severe challenges confronting China's foreign trade at present will remain in place in the second half of this year. The ultimate solution lies in transforming growth patterns and restructuring commodities so as to stabilize China's share in global trade."

He attributed the June export slump mainly to weak global demand, rising foreign exchange and labor costs and frequent trade friction. He added slowing industrial activity and overcapacity in China subdued its imports of raw materials.

China's exports to developed economies - the United States, the European Union and Japan - and developing economies both contracted in June. Exports to the US, China's second-biggest trade partner and largest export market last year, declined 5.02 percent year-on-year in June, compared with a 1.6 percent drop in May.

"The June trade data are worse than expected and weak overseas demand took a further toll on exports, putting more pressure on China's economic downturn," said Nie Wen, a Shanghai-based economist at Huabao Trust Co.

Economic indicators showed that China's economic growth is likely to further slide from a 13-year low amid credit tightening and overcapacity, although Premier Li Keqiang has vowed to press on with economic restructuring. Li said on Tuesday China must rely on economic transformation and upgrading to maintain continuous and healthy development.

China's gross domestic product expanded 7.9 percent in the fourth quarter of last year, ending a slowdown over seven quarters. But the growth rate dropped again to 7.7 percent year-on-year in the first quarter of this year.

"The economic improvement in the US and the EU did not increase overseas demand. China's exports in the second half will probably grow at zero percent while import growth is likely to stay at a single-digit pace. Economic growth in the second quarter will further slow from the first quarter," said Jiang Chao, an analyst with Haitong Securities Co Ltd.

The China Export Leading Index, launched by the customs agency at the end of June 2012 based on an online poll of about 2,000 enterprises, registered 36.1 percent at the end of June, down from 37.6 in May, and marked a decrease for two successive months this year, Zheng said.

A total of 49.2 percent of surveyed enterprises reported a smaller value in the amount of new orders from a year earlier while 43.8 percent of them were "not optimistic" about the export outlook over the next two to three months, he added.

The fall in exports over the past two months was mainly down to the decreased competitiveness of China's products from traditional manufacturing industries alongside sluggish demand from the overseas market, according to Chen Zhiyu, vice-general manager of Fujian Meinkind Baby Products Co.

"Many traditional businesses around our factory, such as those in the toy and garment industries, have seen a sharp drop in overseas sales in the first half of the year," said Chen.

Yang Shan, general manager of Skymen Cleaning Equipment Co, said the company's sales in overseas markets remained stable in June because its products integrate good technology and design and so remain popular.

"We are not largely affected by the sluggish global demand for Chinese products. Instead, our products are witnessing rising popularity in Europe and the US," Yang said.