China's foreign trade volume neared US$1 trillion in the first seven months of 2006, with the gap narrowing between import and export growth rates.

The country's imports and exports reached US$941.9 billion from January to July, a year-on-year rise of 23.1 per cent, according to statistics published by the General Administration of Customs.

Imports stood at US$508.9 billion in this period, while exports hit U$433 billion. The gap between the growth rates narrowed to 3.7 percentage points from 3.9 percentage points in the first six months of the year.

However, the country's monthly trade surplus increased slightly to another record of US$14.6 billion in July.

Exports reached US$80.3 billion last month, up 22.6 per cent year-on-year, while imports stood at US$65.7 billion, up 19.7 per cent from the previous year.

Experts predicted that central government policies would help balance trade, but they also agreed that the high trade surplus could not be tackled in the short term.

In order to further narrow the gap, China will boost imports, loosen controls on capital outflows and make the yuan more flexible, the central bank said.

"Going forward, we expect the growth in imports to moderate somewhat as the effects of China's policy tightening kick in. We also foresee the growth in exports to moderate with the slowdown in the growth of US demand," said Liang Hong, an economist at Goldman Sachs Asia.

However, she believed that the trade surplus was likely to remain large against this backdrop.

She was echoed by Zhai Zhihong, a director of the National Bureau of Statistics, who said that the country's trade surplus may top US$100 billion again this year as overseas firms build export-oriented factories in China.

Zhai attributed the widening surplus to the processing trade instead of weak domestic demand, which was seen by some as a major reason for the trade surplus.

Exports and imports in the processing trade hit US$442.2 billion in the first seven months of the year, accounting for nearly half of the total trade volume.

The European Union remained China's largest trade partner, with a bilateral trade volume of US$143.5 billion in the first seven months.

It was followed by the United States, Japan and member economies of the Association of Southeast Asian Nations.

Guangdong Province, Jiangsu Province and Shanghai came out on top in terms of foreign trade, accounting for nearly 60 per cent of the country's total.