China to surpass Germany as largest exporting country

China is expected to overtake Germany as the world's largest exporter in 2009, despite a sharp fall in shipments as the global downturn took its toll, a high-ranking trade official has said.

The country's share of global trade is expected to exceed nine per cent this year, up from 8.86 per cent in 2008, Vice-Commerce Minister Zhong Shan said at a forum.

"China will probably surpass Germany to become the largest exporting country," he said, according to a statement posted on the ministry's website.

However, 2009 was a tough year for the Asian giant with full-year exports predicted to decline by 16 per cent on-year, Zhong added – the biggest decline in at least three decades, according to ministry data.

He blamed the drop on "severely weak international demand" and "rising trade protectionism", adding the value of trade disputes brought against China in terms of potential losses doubled this year to $12 billion (Dh44bn).

The country will face an "even more complicated foreign trade situation and more arduous tasks" in 2010 given ongoing uncertainties in international demand and the stability of the yuan's exchange rate, Zhong said.

China's trade is "big but not strong", and the country must adjust its trade structure and beef up product quality and competitiveness to "realise... improvement in quality from an expansion in quantity", he said.

In the first 11 months of the year, the country's exports were down by 18.8 per cent from the same period last year to $1.07 trillion, official figures showed.

Inflows of speculative capital, or "hot money," are contributing to volatility in China's stock and property markets, said Fan Gang, the academic member of the central bank's monetary policy committee.

While the inflows help make it cheaper to borrow, "it will also cause asset bubbles," Fan said at a financial forum in Beijing.

He also said that capital will keep heading into emerging markets for "a considerable period" because of limited or zero growth prospects in the industrialised economies.

Fan's warning comes a day after Premier Wen Jiabao pledged to tackle excessive property-price increases in some parts of the nation, citing taxes and loan rates as possible tools. China's policy makers are trying to secure an economic rebound while avoiding the stock and housing bubbles that plagued the US this decade.

While the Shanghai Composite Index has declined more than eight per cent from this year's peak in August, it remains up 75 per cent for 2009. China's property benchmark, which measures prices in 70 cities, increased the most in 16 months in November.

Fan is among Asian officials who have warned in recent weeks that the US Federal Reserve's policy of keeping its benchmark interest rate near zero is spurring global liquidity that is heading to emerging markets.

"Because of uncertainties in the global outlook, the European Central Bank, the Federal Reserve and other central banks are likely to stay reluctant to raise rates or exit stimulus, which will result in more arbitrage trading or speculative funds flowing to emerging markets," Fan said.

Separately, he forecast China's economy may grow eight to nine per cent in 2010 as property investment grows at a faster face, private-sector production increases and exports recover, giving the world's third-largest economy a further boost as the impact of government stimulus gradually fades. Fan, who heads the National Institute of Economic Research, said this was his personal view.

He said there is no reason for China's yuan to depreciate against any currency, including the dollar, euro or yen. "At least the yuan has no reason to depreciate, whether against the dollar or other currencies," Fan told a forum.

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