CHINA'S TRADE SURPLUS OVERSHADOWS TALKS

Hewlett Packard Company chief sales officer Andy Mattes, right, and Wan Shou Gu, left, from a Chinese company, sign papers of agreement in San Francisco, Wednesday, May 9, 2007 during a formal signing ceremony between US and Chinese companies. [AP]

China's trade surplus grew in April, setting the scene for a tense meeting in Washington this month aimed at tackling bilateral disputes.

China recorded a surplus of $16.9bn (£8.5bn), more than double that of March, Beijing announced on Friday. For the first four months of the year, the surplus reached $63.3bn, 88 per cent higher than for the same period in 2006.

More important than the monthly figure is the continued acceleration of the trend of the past two years, in which exports have outpaced imports with China's main trading partners, the US and Europe, by a significant margin.

Stephen Green, an analyst at Standard Chartered bank in Shanghai, issued a report on Friday predicting that China's current account surplus would hit $400bn this year, equal to about 12.8 per cent of GDP.

This would be unprecedented for a country of China's size and stage of development. Surpluses of this magnitude have usually been recorded only by smaller nations growing out of a crisis, or by significant oil exporters.

China's current account surplus for 2006 was $249.9bn, or 9.5 per cent of GDP, well ahead of consensus predictions 12 months ago.

China is sending up to 14 cabinet-level officials to Washington this month for the second Strategic Economic Dialogue, a forum established to provide a long-term framework to manage the two nations' relationship. But with many shorter-term issues on the agenda, the dialogue is being transformed.

Hank Paulson, US Treasury secretary, who initiated the dialogue, has shifted the emphasis in talks from an overwhelming focus on the currency to a discussion on opening China's financial and other service markets.