China's trade surplus surged to a record US$23.8 billion in October as imports slowed and exports further accelerated, putting more pressure on the yuan's appreciation and ballooning foreign exchange reserves.

The gap widened from September's US$15.3 billion, beating most economists' forecasts. Exports jumped 29.6 per cent and imports rose 14.7 per cent, statistics from the customs office showed yesterday. China's trade surplus reached US$133.6 billion during the first 10 months, almost a third higher than last year's total.

According to Stephen Green, senior economist with Standard Chartered Bank, the government's measures to slow down domestic fixed-assets investment is the underlying reason for the slackening of imports which grew at the slowest pace since July 2005.

"On a first look, a stronger renminbi should favour importers by making their purchases  cheaper, but this seems not to have happened yet or is being disguised by other effects," Green said. "Import growth may have slumped because of the government's restraint on investment, which caused economic expansion to slow in the third quarter for the first time in more than a year."

Green believes the more regulators control investment the lower imports of investment goods will be. And that will further exacerbate the external imbalance. For instance, oil imports kept rising at 14 per cent year-on-year despite lower global prices.

Wang Qing, head of Greater China research at Bank of America Corp, said the slowdown in import growth is responsible for the huge surplus and it shows the impact of the government's macroeconomic tightening measures, which slowed investment growth. 

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