In 2011, foreign trade is expected to grow, but at a slower pace given uncertainties such as a stronger yuan (Chinese currency) and simmering trade protectionism.

On September 16, the EU launched an anti-subsidy probe into Chinese-made wireless wide area networking (WWAN) modems, involving around $4.1 billion worth of exports. This was the largest trade remedy investigation China has ever experienced.

"Worse still, recovery of the developed world is losing momentum in part due to a fragile financial industry and the impact of the European debt crisis," the report stated. "Restocking is also slowing down in the emerging economies where the impact of inflation and asset bubbles is taking hold."

Domestically, exporters are coming under heavier cost pressures due to labor cost inflation and price increases for raw materials, said the report. It is therefore necessary to implement further measures to promote exports and encourage imports, especially advanced technologies.

E-commerce Rush

E-commerce in China is burning hot, drawing strength from a robust economy.

The e-commerce transaction volume in the country amounted to 1.2 trillion yuan ($180 billion) in the third quarter, up 6.6 percent from the April-July period, said a recent report by the Shanghai-based iResearch Consulting Group.

B2B remains the most vibrant activity, accounting for 88.5 percent of the e-commerce market. China's B2B platforms raked in combined revenue of 2.51 billion yuan ($374.6 million) from July to September, surging 46.6 percent year on year.

The B2B platforms received growing recognition from enterprises, especially the smaller ones, as foreign trade staged a significant comeback, said the report.

Alibaba.com remains the market leader with a majority 57 percent of the B2B market. The company is also expanding beyond the border. In August, it purchased the U.S. company Auctiva, a third-party software developer for e-commerce websites.

Meanwhile, online shopping experienced a surge as consumers enjoy the convenience of shopping with a mouse click from home. The third-quarter transaction value of online shopping soared 76.9 percent year on year to reach 121 billion yuan ($18.1 billion).

The third-party payment industry also fared well, with its market value skyrocketing 80.5 percent from one year ago to 248.2 billion yuan ($37 billion) in the third quarter.

The government in June ordered non-bank payment service providers to apply for a business license. The policy was expected to create a healthier business environment and steer the sector on a steady path toward growth, said the report.

Feeling the Heat

Hot money may be pouring into China again.

In September, the country's monthly increased foreign exchange reserves exceeded $100 billion for the first time, to reach $100.5 billion, according to the People's Bank of China. It also reported a dizzying 289.5 billion yuan ($43.2 billion) of increased money supply in circulation from foreign exchange inflows.

This has aroused concerns over the influx of international hot money, since the country's trade surplus and foreign direct investment stood at $16.88 billion and $8.38 billion, respectively, in September.

By lowering its interest rates to almost zero, the United States is providing speculators with more cheap credit into emerging markets where the economic uptick offers better returns, said Guo Tianyong, Director of the Research Center of China's Banking Industry under the Central University of Finance and Economics.

In addition, an expected appreciation of the yuan has only added to the appeal of investments in China, said a report by the Chinese Academy of Social Sciences.

Wang Tao, chief economist at the UBS Securities China, believed the recent interest rate hike may accelerate the pace of hot money inflows. But the impact will be limited since China has put a system of capital market regulations in place, said Wang.

In another move, the State Administra-tion of Foreign Exchange launched an investigation into hot money across the country that uncovered 197 illegal cases involving $7.34 billion by the end of October.