China's trade surplus fell sharply in August as exports pulled back from a record high and imports jumped, indicating the world's second-largest economy is feeling the pinch from weaker global growth while domestic demand remains resilient.

China's exports rose 24.5 percent in August from a year earlier, accelerating from the 20.4 percent rise in July, the customs administration said on Saturday.

The export growth was stronger than expectations of 21.6 percent in a Reuters poll of economists.

But month-on-month figures showed exports cooled a bit in August, when debt worries in the United States and Europe fanned fears of a renewed global downturn. In U.S. dollar terms, China's exports totaled $173.3 billion in August, down from July's record high of $175 billion.

August imports hit a record high of $155.6 billion, up 30.2 percent over a year earlier and overshooting expectations for 21.5 percent. That produced a trade surplus of $17.8 billion in August, down 43 percent from in July and the first time it had narrowed in six months.

The European debt crisis and slowing U.S. growth will be reflected in China's export data in the next few months. I expect Chinese export growth to be below 10 percent in the fourth quarter, said Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong

Strong import growth is driven by China's strong demand for consumer goods, luxury items, iron ore, crude oil, soy as well as corn, he said.

China's key commodity imports, including crude oil, copper and iron ore, all rose in August from the previous month, adding to evidence that the world's second-largest economy was still going strong despite slackening growth in the west.

EMERGING MARKETS PUSH

Although the pace picked up in August, China's export growth has slowed from the 37.7 percent rate recorded in January, suggesting China's economy is not immune to global headwinds.

Exports to the United States grew 12.5 percent in August from a year earlier, quickening from July's 9.5 percent, while growth of exports to Europe was steady at 22.3 percent.

Annual growth of Chinese exports to Russia and Brazil both exceeded 38 percent in August, while sales to Indonesia, Vietnam, Thailand, Saudi Arabia and Mexico topped 35 percent, according to the customs agency.

Chinese exporters have tried to expand their market shares in developed economies and diversify into fast-growing emerging markets, though they face increased challenges from rising costs and a firmer yuan.

This shows our strategy of diversifying exports is working. It is very helpful in avoiding big fluctuations in exports and maintaining steady export growth, state television quoted a customs official as saying.

In dollar terms, August exports to the United States were little changed from July's. They were down modestly to the European Union.

Economists widely expect demand from those two regions, which are China's biggest trading partners, will fade in the coming months as economic growth slows.

Still, North America and Europe have generated less than 40 of China's overseas sales this year, down from 55 percent in 2002, according to analysts at Macquarie.

DOMESTIC DEMAND

The robust growth in imports should comfort investors looking to China to pick up some slack in global demand as other major economies sputter.

The narrower trade surplus in August will help China's fight against inflation, Huang Guohua, an official at the customs agency, told state television. The trade surplus, along with capital inflows, has been a source of excess liquidity in the economy and contributed to inflation risks that the government has been trying to contain.

But Li-Gang Liu, China economist at ANZ in Hong Kong, said the central bank may have to raise banks' required reserves yet again if monthly trade surpluses stay between $15-20 billion in the next few months.

August's export and import data showed China's economic growth is driven by domestic demand, not external demand, and its growth momentum is still very strong, he said.

Data on Friday showed China's inflation pulled back in August from a three-year high while economic activity slowed, underlining expectations that the central bank can hold off on further tightening of monetary policy in the face of a global economic slowdown.

Liu is among a minority of analysts still expecting the central bank to raise interest rates once more before the end of 2011. Most others surveyed by Reuters think the People's Bank of China will keep rates steady while it assesses how a global slowdown will affect the domestic economy.

(Reporting by Langi Chiang and Kevin Yao; Editing by Emily Kaiser)

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