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China trade surplus hits record $26.9b

BEIJING -- China's trade surplus soared to a record $26.9 billion in June, exceeding economists' estimates and supplying ammunition for US lawmakers threatening sanctions unless the yuan appreciates faster.

The trade gap, released by the customs bureau yesterday, widened 87 percent from a year earlier after exporters rushed to beat cuts in export tax rebates. A Bloomberg News survey of 15 economists had a median estimate of $23.8 billion.

More than half of the surplus was with the United States, where lawmakers last month introduced legislation to punish nations that use their currencies to gain an unfair advantage. The latest figures may heighten tensions already exacerbated by scares over Chinese exports from contaminated seafood to defective tires.

"This level of trade surplus is unprecedented for China or any other major economy," said Liang Hong, an economist at Goldman Sachs Group in Hong Kong. The country needs "to tackle the root cause of China's bloating trade surplus: the significantly undervalued currency."

The yuan rose against the US dollar before the figures were released and gained the most since the end of a fixed exchange rate in July 2005. The currency climbed 0.27 percent to 7.5810 in Shanghai. The yuan has strengthened 9.2 percent since a peg to the dollar was scrapped. That compares with a 12 percent gain by the euro and an 8.9 percent fall by the yen.

Exports surged 27 percent to a record $103.27 billion, or more than New Zealand's annual economic output. Imports rose 14 percent to $76.4 billion, the slowest growth in four months.

Overseas sales powered the world's fastest-growing major economy to an 11.1 percent expansion in the first quarter.

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