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WRAPUP 1-China tempers expectations for trade in 2010

Published 01/15/2010, 12:52 AM
Updated 01/15/2010, 12:54 AM

* Export recovery will be slow in 2010

* Ideal for exports, imports to return to 2008 value-MofCom

* Share of consumption in GDP rises to 51 pct in 2009

* December new loan, money supply data still to come

By Aileen Wang and Alan Wheatley

BEIJING, Jan 15 (Reuters) - China's exports will make a slow recovery in 2010, a government spokesman said on Friday, trying to cool expectations about the economy's prospects after robust December trade figures this week ignited fears of overheating.

The world's third-largest economy appears to have entered this year with a lot of momentum, contributing to the central bank's decision on Tuesday to lift bank reserve requirements for the first time since June 2008. [ID:nSGE60C009]

"Both exports and imports will only stabilise at a relatively low level this year, and I believe the most ideal situation is to reach 2008's level," Yao Jian, a Commerce Ministry spokesman, said after a news briefing.

China's exports surged 17.7 percent in December from a year ago after 13 months of declines, and imports last month jumped 55.9 percent. [ID:nTOE60A021]

Loan growth is believed to have risen sharply in January, also pushing monetary authorities to act sooner than investors expected, as companies look to lock in funds ahead of anticipated increases in borrowing costs later this year. The government may release December new loan and money supply data on Friday.

Shares of mainland Chinese companies traded in Hong Kong <.HSCE> were nearly unchanged after the Commerce Ministry briefing but were on track for the biggest weekly decline since the last week of November 2009.

Most analysts believe China's tightening moves this week will have little impact on economic growth or corporate earnings, but fears persist that Beijing may be about to launch more aggressive measures that will weigh on the economy.

The outlook has become particularly muddied for Chinese banks and property companies on concerns Beijing will move to cool surging real estate prices to head off inflation and a potentially destabilising asset bubble.

CONSUMPTION GAINS PACE

Yao also said the proportion of China's economy driven by household and government consumption increased in 2009, as the country slowly weaned itself from export dependence.

The contribution of China's domestic consumption to gross domestic product (GDP) was 51 percent in 2009.

That was up from 48.6 percent in 2008, though lower than advanced economies like Britain and the United States where personal spending makes up some three quarters of GDP.

Increasing domestic spending was one of the primary goals of China's massive fiscal and monetary stimulus last year to buffer the impact of the financial crisis as global demand for its exports slumped.

Stripping out price fluctuations, retail sales growth in 2009 likely accelerated to the highest since 1986, Yao said.

"Consumption is playing a much stronger role in driving China's economic growth," he said.

China also saw a 103 percent rise in foreign direct investment in December compared with a year earlier, though full year 2009 FDI inflows shrank for the first time since 2005.

December FDI figures often reflect unusually large increases for accounting reasons.

TO see a graphic on China FDI in 2009 and 2008, click: http://graphics.thomsonreuters.com/0110/CN_FDI0110.gif (Writing by Kevin Plumberg; Editing by Kim Coghill)

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