China's trade surplus reached a record of $27bn in June, an 85% increase on the surplus in June 2006. The huge increase was blamed on Chinese manufacturers rushing to fill orders before reductions in official export incentives came into force on 1 July — see this EngagingChina story for more on that.

Imports climbed 14%, showing that China is delivering on its promise to work harder to redress the balance by buying more western capital goods and technology. But the improvement was more than offset by China's formidable export machine, which went into overdrive in June as exports went up by 27%.

The surplus for the first half of the year reached $113bn, which is more than for the whole of 2005 and equal to about 8% of China's expected economic output for the first six months of this year.

The rebate cuts are among measures announced by Beijing in recent months to reduce incentives for exporters in the face of rising protectionist sentiment in the west.

Last week, the EU trade commissioner Peter Mandeslson once again warned China about the ballooning deficit with EU countries and hinted at tougher measures, which would see the US fall into the line with the more hawkish position of the US.

Mr Mandelson said Europe's trade deficit with the booming export giant is growing at an “intolerable” €15m each hour. The EU is getting increasingly frustrated with China's foot-dragging over a number of issues including intellectual property rights and discriminatory licencing procedures for western businesses that want to enter Chinese markets such as telecoms, construction and finance markets.

The EU estimates that €20 bn in trade opportunities are lost to European businesses every year because of market access barriers

More in this Times story.

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