"China's exports have been hit badly, affecting market-based investment and sentiment, notably in the manufacturing sector," the report said.

The World Bank forecast is well below the minumum 8 per cent level that China's leaders say is needed to hold the country's jobless rate at a manageable level and avoid the conditions that could trigger unrest.

'Bright spot'

Beijing says its stimulus package will
contribute to job creation [EPA]
Despite the fall in trade however, David Dollar, the World Bank's China country director, said the Chinese economy remained "a relative bright spot" in an otherwise gloomy world.

"Shifting China's output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future."

According to bank's latest global forecasts, published in December, the world economy is expected to expand at a weak annual rate of 0.9 per cent in 2009.

It expects a 0.1 per cent contraction in developed economies will be offset by growth in developing countries of 4.5 per cent.

In Wednesday's report the bank said that while it expects China to lead the way in economic growth, GDP expansion of 6.5 per cent would still be "significantly lower than potential growth".

Wen Jiabao, the Chinese premier, said last week that China has made plans to inject more money into the economy, admitting the global crisis was making the government's stated target of about eight per cent growth difficult to achieve.

Wen also said the government was ready to introduce extra stimulus measures if necessary on top of the $586bn already announced.

With global trade volumes falling sharply, China's leaders are trying to shift the engine of growth away from export manufacturing and towards increased domestic consumption.