Taiwan's exports of machine tools are expected to increase to US$4 billion in 2011, which will place the country third in the world, a senior official said Friday.

"Our hands are overflowing with orders," said Chiu Chiou-hui, a division chief at the Industrial Development Bureau (IDB) under Taiwan's Ministry of Economic Affairs.

Chiu said some producers are taking in orders for the fourth quarter already. Exports for the first half of the year could hit US$1.9 billion.

The official attributed a huge part of the demand to China, which lowered tariffs on machine tools after a trade deal with mainland China was signed last year.

Market conditions in Japan have also boosted demand as the appreciation of the yen has made Japanese products more expensive. Toolmakers have also benefited unexpectedly from customers who shifted orders to Taiwan after the earthquake and tsunami which struck Japan in March.

According to IDB statistics, Japan ranked as the world's largest exporter of machine tools in 2010, with an annual export value of US$7.8 billion. Germany was second with export value of US$6.6 billion, followed by Italy with US$3.3 billion.

Taiwan held the fourth spot with US$3 billion in machine tool exports.