Judging by first-quarter figures, the EU maintained its position as China’s leading trade partner. Bilateral trade relations with the EU are growing stronger, with the total trade volume reaching $103.6 billion, up 29.5 percent from a year earlier. The United States and Japan followed in second and third, increasing less than 20 percent. The ASEAN was fourth on the list.

The research institute under the Chinese Ministry of Commerce published a report on May 18, predicting that total imports and exports this year would exceed $2.1 trillion, up 20 percent compared with 2006. Experts fear the rebounding surplus will generate another wave of trade friction with major trading countries.

But “fake trade” or problems with false, misleading, or doctored financial information released by exporters, could be the real culprit. A report by the Academy of Macroeconomic Research under the National Development and Reform Commission said that fake trade has jacked up the trade volume, thus assisting a large influx of speculative capital. The report said that under current conditions, while the yuan is not fully convertible, international hot money has tended to slip in through fake trade and fake FDI, making a fortune in the booming stock and property markets.

The State Administration of Foreign Exchange announced in early April that it has launched stricter checks on forex inflow in 10 coastal cities. The watchdog is determined to crack down on underground illegal “banks” which are supported by speculative money.

FDI & FAI Increase Steadily

Statistics from the Ministry of Commerce show that paid-in FDI increased by 10.17 percent in the first four months to $20.36 billion. However, the number of newly established foreign-invested enterprises dropped 2.29 percent to 12,349.

From January to April, urban fixed assets investment (FAI) surged to 2.2594 trillion yuan, up 25.5 percent from a year earlier period.

Statistics from the National Bureau of Statistics (NBS) show that investment growth in iron and steel, power and railway construction has slowed down significantly. The rapid FAI growth was mainly driven by agriculture, real estate and coal industries.

Investment in real estate was as hot as ever. It jumped 27.4 percent from a year earlier to 526.5 billion yuan in the first four months of this year, defying the government’s measures to cool it down.

The NBS added amid record investment by real estate developers, domestic bank loans rose by 26.8 percent year on year, while foreign investment in the property market also soared 91.7 percent.