China's trade surplus hit a record US$14.6 billion in July, an increase of 40.6 percent on July 2005, according to figures released Thursday by the General Administration of Customs (GAC).

The previous monthly record of US$14.5 billion was set in June.

In July, exports rose 22.6 percent over July last year to 80.34 billion dollars, and imports increased 19.7 percent to US$65.72 billion.

The trade surplus for the first seven months of the year was US$75.95 billion, up 51.9 percent on the same period last year. Exports rose 24.8 percent to 508.9 billion dollars while imports reached US$432.95 billion, an increase of 21.1 percent.

Chong Quan, spokesman for the Ministry of Commerce, said observers should not be obsessed with the quantity of the trade surplus but look at the ratio of trade surplus to trade volume.

"There is no need to worry too much about the trade surplus," said Shen Danyang, deputy director of the MOC's Foreign Trade and Economic Cooperation Institute, "As industries move from one country to another, trade patterns shift. As they have developed, all of Asia's economies - Japan, South Korea and Singapore for instance - have been through a period of rapid export growth, leading to surpluses, but these surpluses are absorbed over time".

The soaring trade surplus has strained China's relations with its trading partners. Many economists believe the 2006 surplus could surpass the 101.2 billion dollars recorded last year.

In the second quarter report released Wednesday, the People's Bank of China said "a basket of policies" should be adopted to address trade surplus issues.

The report said China should expand imports and open its markets wider, with the priority being to shift to quality-oriented trade, encourage imports of advanced technology and equipment, and expand the service sector.

The central bank advocates a unified taxation system for foreign and domestic enterprises, to ensure fair competition.

The central bank claims that the fundamental way to achieve more balanced international trade is to expand domestic demand and cut the savings rate.

The European Union remains China's top trading partner with bilateral trade for the first seven months growing 21.1 percent over the same period last year to US$143.5 billion.

The United States is China's second largest trading partner with trade volume reaching US$142.16 billion. Japan is China's third largest trader with volume reaching US$112.94 billion to July.

The Association of Southeast Asian Nations (ASEAN) is China's fourth largest trading partner with bilateral trade growing to US$86.11 billion.