According to latest available Chinese customs statistics, the total trade during first 11 months of 2006 (January to November) was USD 22.38 billion.

Indian exports to China during the period amounted to USD 9.40 billion while Indian imports from China surged to USD 12.98 billion, allowing China to enjoy a trade surplus of USD 3.58 billion.

With trade figure for December, 2006 yet to be released, industry sources said China's trade surplus with India is set to cross USD four billion. China is enjoying a trade surplus with India for the first time in history.

Analysts say the trade imbalance is mainly due to dwindling Chinese import of iron ore from India while growing demand for Chinese goods from India.

Meanwhile, China will continue to face trade frictions with both developed and developing nations in 2007 despite the government's efforts to balance foreign trade, a government think-tank has forecast.

China's exports will rise steadily and rapidly, notably in sectors such as textiles and televisions sets where the country is highly competitive despite a slow-down in the long term, a report by the Chinese Academy of Sciences (CAS) said.

Emerging fields where China has showed strength in recent years like iron and steel, information technology equipment, automobiles and the chemical industry will become new tension points in which developed nations find it easier to launch protection measures, such as changing technical standards, CAS researcher Wang Taoyang, the chief compiler of the report, said.

Trade disputes with developing countries such as the Czech Republic, Turkey, Ukraine, Mexico and Brazil will possibly occur due to their overlapping strengths in manufacturing and lack of complementary economic structures, the report said.

Official figures show China's aggregate trade surplus surged to USD 156.52 billion in the year to November 2006, dwarfing the USD 102 billion for the whole of 2005 despite the government's efforts to balance payments.

The government has not yet released the December trade figures. However, analysts predict that China's trade surplus is expected to break USD 200 billion-mark in 2006.

Wang said the country should attach equal importance to stimulating overseas and domestic demand to support the sustainable economic development.

The country should quicken the pace of improving the market-based economic system to meet WTO rules and enhance its legal framework, he said.