China’s trade surplus drops 10% in May

China’s overall trade surplus shrank 10% in May from a year earlier, though its contentious gaps with the United States and Europe continued to expand -- suggesting more trade tensions ahead.

Meanwhile, the government also reported Wednesday that China’s index for producer prices, an indicator of inflation, jumped 8.2% in May, the fastest rise in more than three years, thanks to higher costs for oil and other raw materials compared with a year earlier.

Surging prices for such commodities are complicating Beijing’s efforts to rein in inflation, which has been hovering at a 12-year high.

China’s $20.2-billion trade surplus for May is still relatively large -- up from a $16.7-billion gap in April and $13.4 billion in March.

Imports ballooned 40% to $100.3 billion, the General Administration of Customs said, reflecting escalating prices for crude oil and other commodities. Exports rose 28% to $120.5 billion -- still strong despite speculation that the slowdown in the U.S. economy would significantly erode export demand.

China’s overall trade surplus for the first five months of the year was $78 billion, down 8.6% from the $85.7-billion surplus in January through May 2007.

But the gaps with the United States and the 27-nation European Union grew in May. Critics say Beijing is keeping the yuan artificially weak to give Chinese exporters an advantage, even though the yuan has steadily appreciated since its peg to the dollar was cut nearly three years ago.

China’s gap with the U.S. came to $14.3 billion in May, up 13.4% from $12.6 billion in the same month a year earlier. Its surplus with the EU climbed 28% to $12.7 billion.