Aug. 9 (Bloomberg) -- China's trade surplus probably jumped almost 60 percent in July, bolstering Treasury Secretary Henry Paulson's case for a faster appreciation of the yuan.

The gap widened to $23.1 billion from $14.6 billion a year earlier, according to the median estimate of 18 economists surveyed by Bloomberg News. The surplus likely narrowed from June's record $26.9 billion when businesses rushed to beat cuts to export incentives.

Paulson told Chinese leaders in Beijing last week to raise the currency's value without delay and the Senate Finance Committee has approved legislation aimed at pressing for faster gains. Dangerous exports such as lead-painted toy trains have added to trade tensions.

``As the U.S. election approaches, the trade relationship with China will get more attention and tensions become more vocal,'' said Adrian Foster, director of capital markets at Dresdner Bank AG in Beijing. ``The big trade surplus number and product-safety concerns are adding fuel to the fire.''

The figures may be released as early as tomorrow. Exports likely gained 25.1 percent in July from a year earlier and imports rose 16.9 percent.

The seven-month surplus will be $135.6 billion, up almost 80 percent from a year earlier, according to the survey.

Bush, Paulson

President George W. Bush and Paulson yesterday dismissed speculation that China, the holder of the world's largest foreign-currency reserves, may dump U.S. Treasuries. Xia Bin, a government researcher, suggested using the reserves as a ``bargaining chip,'' Market News reported in China on July 30.

Selling Treasuries could weaken the U.S. dollar, diminish the value of China's dollar-denominated assets and accelerate yuan gains. China's currency has climbed 9.4 percent versus the dollar since a fixed exchange rate ended in July 2005.

U.S. manufacturers say a weak currency is an unfair advantage that keeps Chinese products cheap. Finance Minister Jin Renqing said last week that China will move on the currency at its own pace.

China is expected to export $249.5 billion more than it imports this year, about 40 percent more than the record $177.5 billion gap in 2006, according to the survey.

Borrowing Costs

Surging overseas sales helped the world's fourth-largest economy expand 11.9 percent in the second quarter from a year earlier, the fastest pace in more than 12 years.

The People's Bank of China has raised interest rates three times this year and ordered lenders to set aside larger reserves on six occasions, concerned that the cash from exports will stoke asset bubbles and inflation.

``By being extremely resistant to yuan appreciation, Chinese policy makers may be facilitating the very bubble economy they are trying to avoid in the first place,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong.

The benchmark CSI 300 stock index has climbed 130 percent this year. Inflation reached a 33-month high of 4.4 percent in June and the central bank said yesterday that consumer-price gains may quicken.

China's leaders have pledged to boost domestic consumption and imports to narrow the trade surplus. The nation is also curbing exports of the most labor-intensive products, the Ministry of Commerce said last month.

The following table shows economists' estimates for percentage changes in China's exports and imports in July from a year earlier. Predictions for the trade surplus are in billions of U.S. dollars.

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                            Trade Balance  Exports  Imports
Firm                        2007     July     July     July
                            (USD Billion)     YoY%     YoY%
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Median                     249.5     23.1    25.1%    16.9%
Average                    249.3     23.1    24.7%    17.3%
High                       288.0     26.7    28.6%    23.5%
Low                        210.4     19.1    20.0%    13.9%
Number of Estimates           10       18       18       18
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Action Economics           250.0     20.0    26.0%    23.5%
ANZ Banking Group          277.0     22.4    22.0%    15.0%
Bank of China (Hong Kong)  217.8     19.8    20.0%    16.5%
Bank of East Asia          210.4     25.7    25.2%    13.9%
Capital Economics             --     24.0    26.9%    18.7%
CIMB-GK Research           288.0     26.2    27.5%    16.0%
Citi                          --     24.5    26.8%    17.5%
Deutsche Bank                 --     22.3    21.0%    14.0%
Forecast Ltd.              260.0     23.9    28.0%    20.0%
Hang Seng Bank             247.0     21.8    24.3%    18.8%
High Frequency Economics      --     26.4    28.2%    16.4%
HSBC                       243.8     23.0    26.0%    19.0%
ING Groep NV                  --     23.5    25.0%    17.0%
JPMorgan Chase                --     21.8    23.5%    17.8%
Lehman Brothers            250.0     19.1    22.0%    20.0%
Mitsubishi UFJ Securities  249.0     21.5    21.2%    15.4%
Royal Bank of Scotland        --     26.7    28.6%    16.8%
Westpac Banking Corp.         --     23.2    23.0%    15.0%
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To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

Last Updated: August 8, 2007 22:06 EDT