Mumbai: China's monthly trade surplus shrank to the lowest in two years in February as US and European demand for Chinese goods weakened and the country's imports rose sharply, the government said in a report.

China's trade surplus for February this year stood at $8.56 billion, a third of the $23.8 billion surplus it reported in the same month a year earlier, Chinese customs statistics revealed.

While it was the smallest monthly surplus since March 2007, the $6.9-billion surplus was abnormally low. It has been two years since China regularly posted monthly trade surpluses under $15 billion.

The lower surplus also comes amid a sharp 35.1 per cent jump in imports, which totalled $78.8 billion in February, against a mere 6.5 per cent increase in exports, at $87.4 billion.

Exports in January had risen by 26.7 per cent from the same month a year ago, previous reports showed.

While China's own expansion stayed robust, driving demand for imported energy, consumer goods and industrial equipment, the 63 per cent drop in trade surplus reflected the impact of a US slowdown.

China is also under pressure from the US and the EU to ease currency controls and ease import flows amidst mounting Chinese trade surplus.

While this could spur worries slowing US demand will hurt Chinese exporters and wipe out thousands of jobs, Chinese authorities say they are not actively pursuing a large trade surplus and want balanced trade. The government, they say, is trying to encourage domestic consumption in a bid to reduce reliance on exports and industrial investment to drive growth.
China's trade surplus with the US, its No 2 trading partner, shrank 23 per cent to $9.4 billion, compared with the same month in 2007, the customs data showed.

China's exports to the US fell five per cent in February to $16.4 billion, while imports of US goods jumped 33 per cent to $6.1 billion.

The surplus with the 27-country European Union, China's biggest trading partner, narrowed by 15 per cent to $10 billion, data showed.

China last week said it would pursue a more flexible exchange rate policy. China had, in fact, allowed the yuan to rise by about 16 per cent since mid-2005. Western trading partners are demanding a faster increase that would help narrow the trade gap by making China's goods more expensive abroad and making foreign imports more attractive to Chinese consumers.

China, however, has been holding back over concern of possible job losses amidst rising inflation.