China's trade surplus stood at 20.2 billion dollars in May, down 9.9 percent from 12 months ago, prompted mainly by a 40-percent spike in imports to 100.3 billion dollars, according to customs data.

The steep increase in imports also reflected the rising cost of key commodities purchased by China, rather than necessarily a large increase in physical goods entering the country, analysts argued.

"The impact of prices is huge. Oil prices have roughly doubled from a year ago," Tang Xiaosheng, a Shanghai-based analyst with Guosen Securities, told AFP.

However, imports have also expanded due to the need to rebuild parts of southwest China devastated by the May 12 earthquake, analysts said.

"Demand for foreign resources has surged, leading to a larger import bill," Sherman Chan, an economist with Moody's Economy.com, said in a research note.

"Given that the reconstruction work will take an extended period of time to complete, China's appetite for overseas commodities will remain strong in the near term," she said.

China's May exports rose by a more modest margin than imports, increasing by 28.1 percent from the same month a year ago to 120.5 billion dollars, according to the customs authorities.

The Chinese government said last week the nation's trade surplus is likely to shrink in 2008 for the first time in five years on weakening exports mainly due to the rising local currency and the US economic slowdown.

In the first five months of 2008, China's trade surplus hit 78 billion dollars, a decline of 8.6 percent from the same period a year ago, according to customs.

In the five-month period, exports increased 22.9 percent to 545.1 billion dollars, while imports rose 30.4 percent to 467 billion dollars, customs said.

Trade figures are keenly watched by China's main trading partners, not least because many of them believe its currency is undervalued, giving its exporters an unfair advantage.

The European Union was China's largest trading partner in the first five months of 2008, followed by the United States.

China's producer or wholesale prices rose to their highest level in nearly four years in May, the government also said Wednesday, with the cost of oil, commodities and raw materials fuelling the increase.

The producer price index, or PPI, gained 8.2 percent last month from a year earlier, the National Bureau of Statistics said, up 0.1 percentage point from April.

It was the highest level since October 2004, when it hit 8.4 percent year-on-year.

"It's confirmation that China's entering the inflation era," said Andy Xie, an independent Shanghai-based economist.

"There is a shortage of key imports and inflation is centering around those commodities that are in short supply," he said. "In time, the living costs will go up in general, and there will be wage inflation."

Related Links
China News from SinoDaily.com

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News