China's trade surplus is expected to drop nearly US$10 billion by the end of the year.

　　First-half figures showed a surplus of US$39.6 billion, a figure forecast to shrink to US$30 billion for the second half of the year, according to the State Information Centre.

　　"Growth in exports should slow down, narrowing the gap between imports and exports," the centre predicted in a recent report.

　　In the second half, exports are expected to grow 22 per cent, and imports 18 per cent.

　　In the first half, exports grew 32.7 per cent and imports 14 per cent.

　　The report attributed the possible decline in export growth to the revaluation of the reminbi, which has increased costs for export companies and spurred imports.

　　The slowdown of the world economy and the decline in foreign direct investment to China this year are also likely to have a negative impact on exports.

　　China's foreign trade volume reached US$645.03 billion in the first six months this year, with exports and imports at US$342.3 billion and US$302.7 billion respectively, according to statistics from China's General Administration of Customs.

　　The surplus was higher than the entire 2004 figure of US$32 billion.

　　"Such a large trade surplus has aroused great concerns from both China and its trade partners, in particular those having a deficit with China," said Lu Jinyong, a foreign trade scholar with the University of International Business and Economics.

　　A large surplus would intensify conflicts between China and its trade partners, such as the United States and the European Union, leading to increased pressure on the Chinese Government to revaluate its currency, Lu said.

　　Sounding a note of caution, Lu said more time was needed for the situation to become clear. "China's trade situation is also influenced by some 'provisional elements', like the textile disputes," Lu said.

　　China has been struggling since April to contain a trade dispute over textiles with its major trade partners. Fearing the setting of quotas, Chinese textile exporters have been striving to export as much as possible before controls are introduced.

　　The government has adopted a series of measures including the appreciation of the reminbi, to cut the climbing trade surplus, Lu added.