China’s trade surplus has hit record heights amidst mounting pressure from the US and Europe for the Communist government to allow the yuan to strengthen.

The trade surplus for October was $27.1 billion according to data released today, bringing the accumulated surplus for the first ten months of the year to of $212.4 billion – a 59 per cent increase over the same period last year.

The record surplus, which would have been even greater had soaring oil prices not pushed up imports, comes as American, European and French delegations prepare to travel to Beijing to demand an appreciation of the yuan.

Nicolas Sarkozy, the President of France, due in Beijing in two weeks, said: “I will go to China and I will tell (them) they have such a spectacular success ... you don’t need to have a currency so devalued to succeed”.

Jean-Claude Trichet, Governor of the European Central Bank, and Hank Paulson, the US Treasury Secretary, are set to follow Mr Sarkozy by leading delegations to China.

China’s record trade surplus will discomfit Mr Paulson, who, currency analysts believed, would have more leverage over Beijing than his predecessor John Snow, when he was appointed last May.

But Mr Paulson’s tenure has seen the dollar slump ten per cent against the pound and the euro and China mount an increasing trade surplus.

The dollar dipped sharply today to a low of 110.20 against the yen, sagging briefly into 109 yen territory. A few analysts predicted that the circumstances had now grown ripe for a bout of currency intervention by the Japanese authorities.

The confusion was deepened, said currency brokers, by an outburst from Japan’s Chief Cabinet Secretary, Nobutaka Machimura.

In a reversal of more than a decade of policy comments by the Japanese Government, its top spokesman announced that the strong yen was “basically good for Japan as a whole".

The spike in the yen sent stocks tumbling, as the Nikkei 225 Stock average closed down 2.5 per cent at a to a 15-month low of 15,197.09.

Today’s turmoil adds to the gloom already surrounding the Japanese economy. In a note, Henderson Global Investors said today: “Japan’s domestic economy seems set to go through a weak patch, though strong external demand may help prevent a full-blown recession”.

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