Weak external demand may cut China's export growth to 10 percent this year compared to the 25.7-percent jump in 2007, a research unit under the Ministry of Commerce has said.

Li Yushi, director of the Chinese Academy of International Trade and Economic Cooperation, expected the country's trade surplus may also drop to US$200 billion from a record US$262 billion last year.

Will this be possible?

Seen from the first-quarter performance, the pace of exports has really slowed. China's exports rose 21.4 percent to US$305.9 billion through March, versus 27.8 percent in the same period last year.

The trade surplus also fell 10.6 percent year on year to US$41.4 billion over three months ó the first drop in more than three years.

But judging from the volume of orders signed at the spring session of the biannual Canton Fair and the East China Fair, such a sharp decline may not happen, industry experts say.

The Canton Fair, or the 103rd China Import and Export Fair which ended in Guangzhou on April 30, netted export deals worth US$38.23 billion, a gain of 2.1 percent over the transactions in the autumn fair last year and 5.1 percent higher than the previous spring fair.

During the East China Fair which was held in Shanghai in March, export deals worth US$3.68 billion were sealed, a rise of 3.52 percent from a year earlier.

The two fairs have long been viewed as the heart beat of export prospects annually.

Xu Bing, the Canton Fair's spokesman, attributed the moderate growth in orders to the booming trade with new export markets in the Middle East and Southeast Asia regions, which saw deals worth US$4.84 billion and US$1.99 billion, a jump of 9.6 percent and 15.9 percent separately.

Exports to Russia and India also grew 6.2 percent and 32.9 percent to US$1.19 billion and US$930 million respectively at the fair.

However, there were signs of difficulties as China's traditional trading partners showed weaker demand.

"Orders from the European Union, the United States, Japan and South Korea declined," said Xu, without giving details.

The decline mirrored the worries of some government officials and economists.

"The mighty Chinese export sector will likely hit a period of hard times, beyond the US recession," said Tao Dong, an economist with Credit Suisse. "We predict that one-third of export-oriented manufacturers in Guangdong Province, which produces 30 percent of China's exports, will be closed in three years."

While Tao's gloomy outlook may sound like an exaggeration, China's exporters have suffered multiple blows since last year, including a tight credit control, increasing wage costs, the yuan's appreciation, higher producer prices and reduced tax rebates.

These policies and phenomena dealt a serious blow to the sector. Another shadow is the overall uncertain global economic outlook.

The International Monetary Fund's latest report revised the forecast for global economic growth this year to below 4 percent and said the recovery from the subprime mortgage crisis would be slower than its forecast six months ago.

Meanwhile, the introduction of a new labor law, effective in January this year, has many manufacturers worried about rising operational costs.

The law requires overtime payments, contributions to social and pension funds as well as severance packages when employees are terminated. Though it may help raise China's labor rights to meet international standards, it was an immense shock to the manufacturers which are major exporters.

"We estimate that the new labor law adds about 15 to 20 percent extra in terms of operational costs to the labor-intensive manufacturing sector," said Tao. "And on top of that, factories will face greater difficulties when hiring temporary workers."

It used to be a common practice in Guangdong Province that factories terminated workers' contract as soon as orders were completed. Now new law requires employers to recognize them as permanent workers. But the central government is aware of the dire situation facing exporters.

Zhang Xiaoqiang, vice director of the National Development and Reform Commission, said China may need to resume tax incentives for textile exporters.

"Many of these companies are on the verge of shutting down. We should consider resuming some tax incentives to help them survive," said Zhang at a trade conference last month.

Rebates on exports, including textiles, toys and steel products, were cut last year to balance trade and reduce resource-consuming and environmental-unfriendly output.

To cope with the challenges, the government also made efforts to encourage exporters to explore the domestic market and to upgrade their products in the value chain.